Difference Between Futures and Forex

Although both Forex and Futures provide financial tools and services, the two exchanges are very different. Forex, abbreviation for Foreign exchange, is a market where you can trade international currencies. Future exchanges on the other hand, are basically contracts between a buyer and a seller, for specific commodities and assets, where delivery will take place at a certain time in the future in order to limit the speculation effect.

In case of Forex, the medium of exchange that is up for trade will always be a currency, whereas Futures trading can be based upon exchanges of assets and commodities. The chances of fluctuation are greater in Forex trading as there is no pre-defined agreement between two parties. Therefore any changes in price movements can result in greater profits or losses for the concerned parties. Futures trading is relatively less volatile, as the pricing movement is already controlled by a pre-determined contract between the buyer and the seller.

However, there is no flexibility in Futures trading when compared to Forex, which can be completed on the spot or can be pushed over an extended time period. In a Futures contract, buyers and sellers are regulated to purchase and sell the asset on a future date.

Forex market is open 24 hours due to the different time zones, where you don’t need to wait for the markets to open. You can easily get the desired volume of currency from a region where the sun is out. For instance, when the Asian markets come to a close, European markets become active before the North American region plays its part.  For this reason, Forex is the most liquid market, where trillions are traded each day. In comparison, Futures market is not so easily accessible, and trade volume does not exceed billions.

Moreover Futures markets have additional commissions and costs due to their predefined nature. In case of Forex, the cost will only be the difference between the bid and asking price.