Futures Market A-Z
Differences Between Futures and Forex Markets
Contract Standardisation
Futures contracts are standardized with fixed contract sizes, settlement dates, and delivery specifications. In contrast, forex trading involves direct currency exchange with variable lot sizes and no standard contract terms.
Trading Venues
Futures are traded on centralized exchanges like the Chicago Mercantile Exchange (CME) or Intercontinental Exchange (ICE). Forex is primarily traded over-the-counter (OTC) through a global network of banks and brokers.
Leverage and Margin
While both markets offer leverage, futures typically require standardized margin requirements set by exchanges. Forex leverage can vary significantly between brokers and jurisdictions.
Regulation
Futures markets are heavily regulated by bodies like the CFTC in the US. Forex regulation varies by country and is generally less centralized.
Liquidity and Trading Hours
Forex markets operate 24 hours a day, 5 days a week. Futures markets have specific trading sessions based on exchange hours.
Settlement and Delivery
Futures contracts have specified settlement dates and may involve physical delivery of the underlying asset. Forex trades are typically settled within two business days without physical delivery.
Counterparty Risk
In futures trading, the exchange clearinghouse acts as the counterparty, reducing risk. In forex, your counterparty is typically your broker or bank.
Prop Firms
Differences Between Futures and Forex Markets
Contract Standardisation
Futures contracts are standardized with fixed contract sizes, settlement dates, and delivery specifications. In contrast, forex trading involves direct currency exchange with variable lot sizes and no standard contract terms.
Trading Venues
Futures are traded on centralized exchanges like the Chicago Mercantile Exchange (CME) or Intercontinental Exchange (ICE). Forex is primarily traded over-the-counter (OTC) through a global network of banks and brokers.
Leverage and Margin
While both markets offer leverage, futures typically require standardized margin requirements set by exchanges. Forex leverage can vary significantly between brokers and jurisdictions.
Regulation
Futures markets are heavily regulated by bodies like the CFTC in the US. Forex regulation varies by country and is generally less centralized.
Liquidity and Trading Hours
Forex markets operate 24 hours a day, 5 days a week. Futures markets have specific trading sessions based on exchange hours.
Settlement and Delivery
Futures contracts have specified settlement dates and may involve physical delivery of the underlying asset. Forex trades are typically settled within two business days without physical delivery.
Counterparty Risk
In futures trading, the exchange clearinghouse acts as the counterparty, reducing risk. In forex, your counterparty is typically your broker or bank.