Weekly Newsletters, Futures Trading Tips & Insight, Commodity Trading Educational Resources & Much More.
Trading currency futures offer the perks of a central exchange and transparency regarding the flow of orders as they come into the market. Market participants share a level playing field with volume transparency and the information they use to trade. Traders are provided with peace of mind and can unabashedly focus on improving their performance, which promotes a diverse and liquid trading environment. Confident traders in turn create liquidity in the financial markets.
Trading liquidity persists across many major USD futures currency pairs, including the Euro(6E,) Yen(6J,) British Pound(6B,) Canadian Dollar(6C,) Australian Dollar(6A,) Mexican Peso(6M,) and more. The reasonable margin requirements and competitive trading fees and commissions of the futures market make trading currency futures an attractive option for many styles and types of traders.
However, even though it’s transparent, don’t underestimate the challenge provided by the market itself. Liquidity and tight bid-ask spreads are created from voluminous markets. Importers and exporters hedging their currency risk, financial institutions conducting business, and speculators hoping to earn a living, are all hoping for a better future. This creates a competitive atmosphere with participants jockeying for the best position. It’s definitely an environment to prepare for carefully.
The exchange continues to provide accessibility for traders of many different capital amounts. Trading at 1/10th the size of the larger contract, the E-Micro FX Futures provides a smaller alternative than their larger relative. Although the fees and commissions tend to scale more economically for the larger sized contracts, the micro contracts allow traders more flexibility to size their positions. In addition, they also provide opportunity for creative hedging, spreads, and pairs trading with the bigger contract sizes. A savvy trader may find themselves geographically tracking interest rates.
It’s common for traders to have a favorite instrument. It can be argued that a trader’s favorite instrument is one that they’re most familiar with. Currency futures traders tend to find niches as each pair or futures contract will have behaviors unique to itself. As technology advances and the markets continually become more efficient, instrument correlation is more obvious. Though correlated at times, the volatility, price behavior, liquidity, and volume of each instrument or currency will be unique.
For novice currency futures traders, the excitement of “giving it a try” will often outpace their strategic planning phase. Most traders can remember the thrill of their first few trades. Before long, the reality of the market tends to encroach on a trader’s psyche. Beginners learn that the market is not as easy as they would’ve hoped and they wish they had been more thorough in their planning stages.
It’s obvious and underutilized that a trader’s discipline will slip when it’s least expected. The best tools, plan, education, and commission structure will be of no help to an undisciplined currency trader. At the pinnacle of adversity, when asked about discipline, traders tend to smile. It’s a sensitive subject.
Important: Trading commodity futures and options involves a substantial risk of loss. Therefore, recommendations contained in this letter are of opinion only and do not guarantee any profits. There is not an actual account trading these recommendations and past performances are not necessarily indicative of future results.