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You should ensure that you fully master how your margin account functions. You’ll want to make sure that you read the agreement margin that exists between you and your clearing firm.
You’ll
also want to contact
your account
representative with any
questions you might
have.
The
positions which are
present in your
account could be
moderately or
completely liquidated
on the basis that the
margin available in
your account falls
beneath an amount
which has been
predetermined.
Your
margin call might not
come in before your
positions are
liquidated. Due to
this, you should
supervise your margin
balance on regularly
and use stop-loss
orders on every open
position to limit the
possibility of a
downside.
2.
No Fees for
Commission or
Exchange
When
you decide to trade in
futures, you will have to
pay for exchange and
brokerage fees. The
advantage of trading with
FOREX is that it is
commission free. This will
prove to be far better for
you, because currency
trading is an inter-bank
market which is worldwide.
Therefore, it enables
buyers to get coordinated
with sellers immediately.
Even though there are no commission fees for broker matching buyers up with the seller, the spread is usually larger than it is when you are trading futures.
As an example: If you trade a Japanese Yen/US Dollar pair, FOREX trade will give you about a 3 point spread (worth $30). However, if you trade a JY futures trade you would most likely get a 1 point spread (worth $10) but on the other hand, you would also additionally have to pay commission to the broker. This price could be as low as $10 in-and-out for online trading which is self-directed, or as high as $50 for full-service trading. Note that the price is all-inclusive.
You will have to evaluate the difference in commission with your online FOREX and your specific futures in order to find out which commission is the greater one.
3. Limited Risk and Guaranteed Stops
Your risk can be unlimited when you are trading futures. An example would be if you thought that the prices for Live Cattle were going to continue rising in December 2003, just before Mad Cow Disease was found in American cattle.
The price for Live Cattle after that striking fall moved the limit down for several days in a row. You wouldn’t have been able to leave your position and as a result, this could’ve cleared out the entire equity in your account. As the price quickly decreased, you would have needed more money in your account in order to make up for the fall.
Click here for the net step in your FOREX guide .
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