This is possible in the spot forex market, but it requires opening a basket of trades in multiple currency pairs, so it is inherently much more complex to enter a trade and much more difficult to manage. Trading single currencies in the futures market can be very attractive as the risk of picking the wrong quote currency to trade against is entirely eliminated.

In the forex market you may be correct that the Australian Dollar is going to depreciate over the coming months, but select a trade against a currency that depreciates even faster, ending up with a losing trade. In the United Kingdom, spot forex trading is known as spread betting and considered a form of gambling that can be tax free depending on your circumstances. How your trading profits are taxed can vary wildly between markets and even more so between jurisdictions.

It could also be worth looking at trading via a special purpose structure in another jurisdiction. When it comes to speculating on fluctuations in foreign exchange rates or hedging foreign currency risk you have a wide array of options.

Only after considering the difference between forex and futures, can you make a final decision on which is right for you. After comparing forex vs futures, the right product for you will come down to the availability, your trading strategy and a host of other factors. If you are just getting started trading forex, the spot market is much more accessible and is likely the ideal place to start. August 12, The Difference Between Trading Forex and Currency Futures Forex Basics 2.

Consumer confidence surveys 8. Trade balance 9. Manufacturing sector surveys. Depending on the current state of the economy, the relative importance of these releases may change.

For example, unemployment may be more important this month than trade or interest rate decisions. Therefore, it is important to keep on top of what the market is focusing on at the moment. According to a study by Martin D. Evans and Richard K. Lyons published in the Journal of International Money and Finance , the market could still be absorbing or reacting to news releases hours, if not days, after the numbers are released.

The study found that the effect on returns generally occurs in the first or second day, but the impact does seem to linger until the fourth day. The impact on the flow of buy and sell orders, on the other hand, is still very pronounced on the third day and is observable on the fourth day. The most common way to trade news is to look for a period of consolidation or uncertainty ahead of a big number and to trade the breakout on the back of the news.

This can be done on both a short-term basis intraday or over several days. After a weak number in September, the euro was holding its breath ahead of the October number, which was to be released to the public in November. A pip is the smallest measure of change in a currency pair in the forex market, and since most major currency pairs are priced to four decimal places, the smallest change is that of the last decimal point.

For news traders, this would have provided a great opportunity to put on a breakout trade, especially since the likelihood of a sharp move at this time was extremely high. The chart above illustrates—with two horizontal lines forming a trading channel —the indecision and uncertainty leading up to October non-farm payroll numbers , which were released in early November.

Note the increase in volatility that occurred once the numbers were released. We mentioned earlier that trading news is harder than you might think. The primary reason is volatility. You can be making the right move but the market may simply not have the momentum to sustain the move. This chart shows activity after the same release as the one shown in Figure 2 but on a different time frame to show how difficult trading news releases can be. On Nov. economy gained only 56, jobs. The disappointment led to an approximately pip sell-off in the dollar against the euro in the first 25 minutes after the release.

One thing you should keep in mind is that, on the back of a good number, a strong move should also see a strong extension. dollar was able to take control and push higher. Keep in mind, when the U. dollar is appreciating against the Euro. One potential answer to capturing a breakout in volatility without having to face the risk of a reversal is to trade exotic options. Exotic options generally have barrier levels and will be profitable or unprofitable based on whether the barrier level is breached.

The payout is predetermined and the premium or price of the option is based on the payout. The following are the most popular types of exotic options to use to trade news releases:.

A double one-touch option has two barrier levels. Either one of the levels must be breached prior to expiration in order for the option to become profitable and for the buyer to receive the payout. If neither barrier level is breached prior to expiration, the option expires worthless. A double one-touch option is the perfect option to trade for news releases because it is a pure non-directional breakout play.

As long as the barrier level is breached—even if the price reverses course later—the payout is made. A one-touch option only has one barrier level, which generally makes it slightly less expensive than a double one-touch option.

The same criterion holds—the payout is only made if the barrier is breached prior to expiration. This is a good option to buy if you actually have a view on whether the number will be stronger or weaker than the market's consensus forecast. Options on currencies are a viable alternative for those who do not care to get whipsawed in the markets by undue volatility before they actually see the spot price move in their desired direction; there are different types of currency options available through a handful of forex brokers.

A double no-touch option is the exact opposite of a double one-touch option. There are two barrier levels, but in this case, neither barrier level can be breached before expiration—otherwise the option payout is not made. This option is great for news traders who think that the economic release will not cause a pronounced breakout in the currency pair and that it will continue to range trade.

The currency market is particularly prone to short-term movements brought on by the release of economic news from both the U. Although the above approach might have meant having to wait for a great deal of time, the trade opportunity above was a very low risk trade at that.

News Based Trading — Final points to bear in mind. Trading news based events can be profitable if using the right approach. Below we summarize the important points. Download Indicator that shows Economic news on your chart. Recommended by ProfitF :. Forex Broker Binary Broker ForexVPS FX-Signals BO-signals. PROFIT F About Us Write For Us Affiliate Program Advertising Contacts. Trading Forex, Binary Options - high level of risk.

Please remember these are volatile instruments and there is a high risk of losing your initial investment on each individual transaction. Home Forex Brokers Binary Options Brokers Trading Software Forex VPS Signals Analysis Other Tools Forex Education Forex Strategies BinaryOptions Education Binary Options Bonuses Binary Options Strategies Articles Humor ProfitF Write For Us Advertising Contacts.

Trading based on News Events With the forex markets pretty much covering most of the Globe, the news or fundamental events that affect the short term and long term price movements are many.

Fundamentals or News Events Trading the short term market moves Trading the News. Price was within the uptrend after the consolidation pattern The fact that price failed to drop any further than the closing price indicates a strong supply or support level. As can be seen in later candles, price consistently bounced off this level The support level created during the news event will be an important level to watch at least in the near future.

Projecting the trend line, we can observe a possibility of the trend line to break. However, a close and a retest of the support level created during the news event will be a validation that bears are in control. The chart below shows what we can expect in the near future. News Based Trading — Final points to bear in mind Trading news based events can be profitable if using the right approach.

What are Currency Futures? Spot Forex vs. Currency Futures Spot Forex Futures Spot Forex vs Futures Cost Comparison Bottom Line FAQs. Home Forex Articles What is Better Futures or Forex? What is Better Futures or Forex? Justin Paolini. on May 23, Currency Futures. Spot Forex. Spot Forex vs Futures Cost Comparison. Bottom Line. Trading the swings in exchange rates - Forex vs Futures Trading. Rolling Spot Forex, Forex CFDs, Currency Futures.

Ever since the FX probe back in , the whole Forex vs Futures debate has become livelier. So, in this article, I will compare the pros and cons of rolling spot Forex to Futures, to help you understand which asset type is better for you to trade.

Advertisement Think you have what it takes? Start trading now! Justin Paolini helps traders succeed through 1-on-1 coaching at BuildingaTrader. He is also Head of Trader Development at FCI Markets UK. Justin has over 15 years of experience trading Forex of which 3 were spent as a Sales Trader and as a Broker.

Previously, he was an analyst at 3CAnalysis. com, producing institutional grade directional calls. His market commentary has been published on FXRenew. com, Yahoo! Finanza, Trend Online, FX Street, OrderFlowtrading.

com, and ForexTell. For the past 8 years, he has dedicated himself to helping others succeed, and has been a guest lecturer at the University of Ancona on Trading and Market Dynamics. Justin holds a B. Sign Up Enter your email. Did you like what you read? Let us know what you think!

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Both can be a good way to turn a profit, depending on your trading strategy. About the author. While the futures market can also be traded overnight, the liquidity is still quite thin during those hours compared to the spot forex market. A double one-touch option has two barrier levels. Each currency future has a corresponding symbol on the exchange. Any person acting on this information does so entirely at their own risk. Unemployment 5.

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