currency trading ppt

Online Currency Trading - Forex Vs Futures

There are many decisions to be made when considering online currency trading as a business.   One of the first questions that must be answered is:  "what is the difference between currency futures and the forex market, and which one should I trade?"  
The benefits of trading spot Forex (cash market) instead of currency futures are considerable.   The differences include: transactions fees, margin requirements, liquidity and trading hours, and the leverage available to the trader.  
 1. Transaction Fees:  In the Forex Market, your cost of making a trade is only the spread between the buy and sell. It is low because of the incredible volume traded.   
 To trade currency futures, you must not only pay a spread (not easily visible), but there are exchange fees and broker commissions that are also charged.  
2. Liquidity and trading hours:  The Forex market trades roughly 2 to 3 TRILLION dollars per day, which ensures good order fills and price stability no matter what time of day you trade.   Because of the huge volume, it is much easier for the Forex trader to enter and exit trades at his set price levels than if he were trading futures. 
Also, because the spot (cash) foreign exchange market is a true 24 hour a day, 5.5 days a week market, it is much more advantageous to trade.   The trader is able to fit his schedule to trading and not worry about volume or getting his price on a trade, no matter what time of the day or night.  
After hours trading in the futures markets presents some severe limitations. The volumes traded on after hours ECN's are much lower. This translates into larger spreads  and the probability of not getting your orders filled at fair market price. 
3. Leverage.  The leverage available to the trader (the amount of  margin needed in relation to the amount of currency traded) is much greater with Forex.  100 to 1, or even 200 to one is very common with FX brokers, whereas the usual leverage with futures is 15 to 1.   As always, leverage can work against you as easily as for you! 
4. Easy to read price quotes. If the cash price for the EUR/USD pair is 1.4102, that means that one Eurodollar is currently worth $1.4102 US.  Currency futures quotes are an inversion of the cash price, and more difficult to understand at a glance.  
Forex trading has many advantages over trading currency futures, but good risk management and a proven trading plan must be used in order to make consistent profits trading the forex market.