Forex Futures Contracts

The futures market has changed significantly since then, in current times the futures market is no longer restricted to agricultural products. This worldwide commodities market now includes items such as manufactured goods and financial products as well as agricultural products. A futures contract is a provision that a certain product will be sold at a fixed price on a certain date.

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When speculators play the futures market there is no expectation of the products being delivered and the actual goods aren’t even important. It is actually just the contracts themselves that are traded and the market value of these contracts is in constant fluctuation.

When investors enter the futures market they don’t expect actually delivery of the physical products. The acutal product in question is acutally irrelevant. The only thing that is traded is the actual contracts and the change in the value of such contracts determines whether the investor wins or loses and by how much.

Forex Futures Contracts: And so much more…

In every futures contract there are two positions a long position and a short position. The short position is filled by the vendor and the long position is the purchaser. Futures accounts are settled on a daily basis.

As an example a farmer enters into a contract with a grocer to sale him 1000 bushels of corn at $10 a bushel. At the expiry of the specified time the contract is settled, if the current market price of corn is at $9 a bushel the farmer will realize an extra profit of $1000 dollars on the contract and the grocer will have lost the same amount. In this situation the farmer now sells his corn at $9 a bushel on the open market but his loss is covered under the profit from the contract. The grocer now will buy his corn for $9 a bushel but in reality he’s still paying $10 a bushel as a result of the cost of the contract. If he hadn’t signed a contract he could’ve bought his corn for $9 and saved $1000. However if the price of corn had risen significantly to $13 a bushel he would have saved himself $3000.

Speculators try to guess the meaning of the market fluctuations and make a profit by buying and selling contracts.

The FOREX market has numerous advantages over the futures market. Since it is the most important financial market around the world it is far higher than the futures market. The FOREX market is likewise far more fluid. This makes it easier to execute stop orders with very little slippage.

The futures market is usually only open 7 hours a day where as the FOREX exchange is open 24 hours a day 5 days a week. This extra time makes the FOREX market more fluid and allows traders to take advantage of this by trading at any time instead of awaiting the markets to open.

Futures markets are generally only open around seven hrs per day. Foreign exchange markets are essentially open 24 hours a day Monday to Friday. This means that Forex traders are in a position to trade out of the other markets normal trading hours.

There are no commissions in FOREX trades; the brokers make their profit through the spread. This is the difference between the currency buy price and selling price. In futures contracts the trader is required to pay commission fees on every transaction.

This allows for better price control of your trades, owing to the extremely high volume of trades in the FOREX market most transaction are executed almost immediately. In future contracts the price the broker quotes will come from the last transaction and your price could be significantly different.

In the futures market debits are a constant possibility due to daily fluctuations. The FOREX exchange has many built-in safeguards in the trading system that helps protect the traders.

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