Learn Futures Trading | Hedging Futures

Futures trading as the name suggests, is the trading of commodities that are delivered in the future. The goods delivered can be anything like the grains, livestock, forex or metals. This contract is helpful as well as useful for both the producer and the buyer. This will protect both of them from any type of unfavorable price fluctuation.

As we go into the understanding of the futures trading, then we understand its meaning and genesis. In the world of currency, there are two distinct types of Forex trading which is done. The first currency trading is well known as spot trading. And the second way in which currency can be traced is the Forex Futures trading. There is the basic and important difference between the both. And that difference which separates both of them is the fact that spot trades are handled in what is termed as over the counter. The fact is that there is no central location in which any type of forex transaction is cleared. There is only one place for the futures trades to get cleared and i.e. Chicago Mercantile Exchange only.

The Chicago Mercantile Exchange, or CMX, is the only organization which has been offering forex futures trading since 1972. Today, the CMX has reached to the pinnacle of success and it offers futures on 41 currency pairs, options on 31 currency contracts and it holds over $60 billion in total liquidity. This is again the great achievement for the CMX. There is another feature to the Chicago Mercantile Exchange i.e. it also does futures transactions on their world-renowned Globex platforms. As well it also offers trading on the e-mini equity indices, which is real helpful for all.

One of the biggest differences which, has been highlighted in Forex spot trading as opposed to Forex Futures is that the former works very well for those whose habits tend to lean towards trades that are of a shorter term. But in the case of Forex Futures trading, it is typically better for larger, long-term trades.

The difference which is real amazement in the two is the cost involved in currency trading. According to the latest information, the futures has a cost of around $20 or less per round turn. And the Forex spot trade will run anywhere from $30 to $50 and up per round turn, which is a significant thing. This aspect or the feature of Forex Futures trading makes it the trade of choice for most currency day traders as well as the lucrative option for all. The only disadvantage which forex spot trade has is, they have no idea with what company or with whom they may be doing business. This is the seldom an issue, but some investors prefer doing business at a central location because that is convenient to them. But with Forex Futures trading, this is not an issue, they have an added advantage.