Which to trade – Forex, Futures, Or Options on Futures?
Both futures and forex trading have their advantages and disadvantages. Trading forex – or foreign currency pairs – gives greater leverage than outright futures trading, of up to 100:1. This means that for every $1000 put up in margin, you can trade with up to $100,000 in currency value. If you put up $10K, you could trade with $1 Million of currency. This means that if there is a 1% move in the value of the currency pair that day, it would give you a profit/loss of $10,000, or 100% change on your investment. This would be great if you were right, but disastrous if you were wrong as you would have lost your entire trading account. Trading futures, you usually get leverage of around 2%, so you can do twice as much with your money trading forex (losing twice as much as well as winning twice as much. Money management is important!). If you are swayed to forex because of the increased leverage, hang on a minute because you may be able to get much more leverage using options on futures… D
