The world of forex trading has been one that has been at the forefront of investor interest for several years now. This is due because this asset class differences from other assets, such as stocks, bonds and property, in that the ebb and flow of forex rates is not tied to the general economic cycle. This means that investors in the forex market can expect to see performance through both the boom, and the bust, of conventional asset classes.
However, one of the main issues with forex trading, especially when it is focused on the technical approach to trading, is that it requires a lot of attention. In order to profit from the forex price cycles, you have to trade over short time scales, often minutes or hours, and pay close attention. That can be a very exciting and rewarding approach to making money – but it can be a problem for those with less time available.
There is another approach, however, that lies outside of the traditional forex broker over-the-counter market – forex futures trading. This is a form of trading currencies that predates much of the recent small investor forex trading activity. Forex futures trading takes place on futures exchanges, where lot sizes, tick sizes and price quotes are defined as part of standard contracts.
Profits and losses are made in the same way, through marking of prices agreed to the current market rate, with both realized through your margin account. But the advantage of using the futures exchange is that you can put on trades that are long-dated and use them as a building block for more sophisticated strategies.
This means that instead of chasing small-scale price changes over short time frames, often intra-day, you can more easily make long-term plays over weeks, months, or even years. This approach to trading better suits a fundamental analytical approach where you are looking at how dollars will play off against yen due to longer term economic factors. This is much less time consuming for you to follow day-to-day. You will still need to do thorough research before entering trades; And you will need to have a fairly good insight into the economic fundamentals of the global economy. But once you have entered long-date forex futures trades, you can monitor them at your leisure, over the agreed contract length.
You can also set up more sophisticated trading strategies, particularly in combination with forex options. You can create trading risk profiles that are based around particular time sensitive points. Or you could even take advantage of increased or reduced volatility in the forex markets. So if forex trading is on your investment horizon, forex futures trading is an investment vehicle you should definitely investigate.