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Home / Beginners / Why I Switched From Forex To Futures

Why I Switched From Forex To Futures

When I (Moritz) came into trading, I was – as so many – dragged into the Forex markets. Their advertising is all over the place, their forums are the biggest, they have the biggest and easiest brokers to access, and the market overall is badly regulated, making it easy to open accounts. Additionally, you can start to trade with as little as 200$ or even less, and the leverage available makes the dollar signs go bling in our eyes. Experienced traders, however, realize that all of these “advantages” are actually disadvantages to a new trader, even if they look like the holy grail to a beginner.

Big forums mean lots of resources but also lots of trash – it is impossible for a beginner to separate the good from the bad from the ugly. Easy access to brokers is great, but do you really want to give your hard-earned money to a broker that has its main office in Panama? Leverage will do only one thing to you as a beginner: total destruction. And trading with a small account is a great, great way to learn, but it is not a great way to make a living.

Don’t get me wrong, I owe everything to Forex. Had it not been for the incredibly low access barriers, I probably would never have touched trading. Technical analysis prevails in almost all markets, and I honed my skills there and became profitable, as well. There are a few brokers like IC Markets as well that I truly trust and have no problem with them handling my money.

However, I wish I would have taken a look at other markets much, much earlier. I was so fixated on Forex that I did not realize that other markets offered advantages that far outweighed the costs of entering them. I am talking about Futures here, especially. In Forex, there is no centralized exchange – thus we can never know what volume is in the market and how many market participants are acting, which in my opinion is such a vital information to have, especially when daytrading. In Futures, you can exactly see how many trades come into the market in what time and at what volume, giving us access to alternative charting methods like tickcharts, volumebars, and so on, as well as granting us the Depth Of Market meter, granting us vital information about what the big players are doing. Those are incredible tools to have, however mind you, you still have to learn how to use them, as with anything.

Also, the costs of trading in Forex are actually higher, despite advertising of 0.1 spreads and so on. In Futures, daytraders have a greater chance of survival (with the right brokers), as the costs of trading can be substantially lower, depending on the instrument/exchange.

Futures also very often move with their underlying assets, providing us with additional information we can utilize. The markets are incredibly liquid and trade just as well as Forex, if not better. I have found that on the instruments I trade, technicals are easier to follow and the markets surprise me with jerk moves much, much less often.

Yes, margins are quite high, even though daytrading margins are usually ½ to ¼, making it realistic to start trading 1 contract with an account of around 5,000$. There are great, regulated brokers with incredible customer support as well, like Optimus Futures.

Yes, you have to do a lot of research before opening your first account, as you not only have to choose a broker, you have to choose a trading platform and a data feed as well, which most of the time come at additional costs, plus the Futures trading platforms are much, much more complicated than Meta Trader 4. However, the investment will pay off surely, as the superior technology and information you can utilize in the Futures markets while trading, will bring you closer to creating and executing a profitable strategy than you might expect initially.

Since switching to Futures I have improved my profitability, significantly reduced my screentime and also reduced my costs of trading. After an initial “information shock”, I quickly plowed through all the knowledge I needed and had my account up and running two weeks later, placing my first live trades with a strategy I traded in Forex before, and which I have since evolved into something even more efficient.

Why I did that? Simple, because I am a trend-following flag trader. There are not many Forex pairs that produce sustained trends and thus give me trades, so I had to watch many, and I had to watch them for many hours. A friend of mine said, take a look at the E-Mini Nasdaq and I did. Since then, I haven’t looked back, as this instrument perfectly fits my strategy – I added a few more as well, for example, the E-Mini Dow Jones which also tends to trend very nicely. Most trades happen around the New York open, so that’s the only time I have to be in front of the screen to grab my ticks. I’m a happy camper.

Now I don’t necessarily want to make you move to Futures if you are happy in Forex as excellent results can be achieved in any market, as Rolf is demonstrating each and every week. However, I urge you to look around and gather information and knowledge, as that is all we have in this business. Knowledge is power and had I known that my strategy was much easier to trade on certain instruments in another market, than on any Forex pair, I certainly would have saved myself a few headaches.

Tradingview offers charts of almost every market out there. Take a look and see how your strategy would do, you will be surprised, I promise. The most important quote I ever read in trading is “Don’t trade ugly charts” – and yes, to one trader a chart is ugly, to another it can be beautiful, it depends on your strategy. So cycling through instruments to find beautiful charts is such an important part of trading. Now I also think, cycling through markets and seeing whether they have beautiful charts as well, is just as important. Never stop learning, never stop seeking out information, but stay inside your circle of competence. Don’t become a trend trader because you find a market that trends hard. Stay a reversal trader (or whatever) and find a market that applies well to that strategy.

For those that now became interested in Futures but don’t know where to start, here are a few resources to get you started. Additionally, simply ask me questions in the comments below and I will answer them all, no problem.

Investopedia – A brief introduction to Futures, what they are, where and how they are traded

My Youtube Playlist – I upload 2 videos a week about how I trade Futures, and other topics surrounding the Futures market

Futures Radio Show – Fun podcasts to listen to with educational value

Futures.io – Huge forum where you will find a topic about really everything related to futures

Sierrachart – There are countless platforms to trade Futures off, but I found Sierra Chart to be reasonably priced with more than enough functionality/stability to make it my #1 Futures trading and charting software

Rithmic – The data feed I use, have found it to be the most reliable one, reasonably priced

Optimus Futures – The broker I use, excellent customer service, well regulated, and again reasonably priced

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29 comments

  1. A candid,splendid and informative post by someone who has maybe ‘earned’ their rank! Notwithstanding the garbage strewn around with such abandon, I am a Forex trader. Although I realise there are easier kills out there, consequently I have reasoned to opt out somewhat, and give a more open trading attitude to Life. I tend to vote with Vince Stanzione for this, his reputation is one of the best-even though he is a Brit.
    The worst thing to happen to any new punter is a Big Win, if you know what that means-you know what that means! For the rest ….Amen.

  2. One important fact you left out as an advantage of trading forex is the leverage.

    • Hey James,

      I actually listed it as a disadvantage because it is a horrible tool for beginners :).

      Bests,
      M

      • I see your point for a newbie where they could get lured into seeing how leverage is the necessary evil to make their profits, but I disagree. Once you figure out how to trade and manage your money, the leverage becomes part of the holy grail. The majority of people mortgage their homes because of the leverage the bank gives them at cheap interest rates. Why tie up your own money. Same goes in the forex, use their money to make your profits. Especially for a newbie who does not have much $ to start with. They just need to learn how to manage the amount you “borrow” per trade. Just my 2cents

        • James, using leverage can be a vice or virtue, but for most, it is a vice. I agree, though, that (as everything in trading) it is absolutely not a black and white topic and I will actually have an article out on this on Thursday. Leverage can be abused heavily to make sizable returns, if used wisely. It would be foolish not to use it ONCE profitable :).

          M

          • I would also like to add that Futures are definitely smoother! Nowhere near as bouncy or spikey as forex. Good article.

          • Yes! Absolutely. The liquid Futures instruments are much more fun to trade with technicals on an intraday basis.

  3. Julian Harveyson Edwards

    Great read Moritz, have been toying with taking a look at Futures for several months now and this popped up. Will do some more homework.

    Thank You

    Julian

  4. Hi Moritz,

    Nice article, thanks for taking the time to write that.

    Did you consider ETFs instead of futures? Would be interested in hearing your thoughts on that.

    Cheers,
    David

  5. look at dax. dax loves hand drawn channels in 5min and 60

  6. Hey Moritz,
    Thanks for sharing this article.
    So you just trade the nasdaq and dow jones for the US open session? I live in Australia and am wondering are there good futures contracts to trade for the Asian and Euro sessions?
    Also have you looked at trading currencies on the futures market like the Euro or US dollar etc? I always wondered if I could watch the Euro futures market and analyse volume would I be able to use the volume information with Euro based forex pairs so help confirm trades etc.
    I will definitely be checking out your videos.
    Cheers

    Luke

    • Hey Luke,

      glad you like my stuff! Yes I trade the NQ and YM at US open and atm I am looking into DAX, Bund, for example, for trading Euro Open, but haven’t got any experience with it yet! As for volumes, never used them, also have never looked at currency futures, so can’t say much about it :). I like to be a one-trick-pony and milk the cow as long as it works, then look for another trick, so I don’t spread myself too thin.

      Leave me a thumbs-up on the videos if you like them and let me know if you find nice, trendy, futures contracts around the Euro open!

      Bests,
      M

  7. Hi mate,
    Any way we can demo on futures? (Like we do on FX brokers?)

    • Hey Simba,

      yes there are many brokers that offer this option! Check out Optimus Futures, for example, for great trial options on several trading platforms!

      Bests,
      M

  8. Hello Moritz,

    About starting with futures, what are your thoughts about a newbie in trading ( I started forex and the education path about 8 months ago), stick with forex and get better there and then move to futures or develop further education straight into futures and not “waste” time in the forex?

    Thanks a lot.

    Greetings,

    B

    • Hey Bert,

      Forex is much cheaper to learn than Futures as there are micro lotsizes so for learning technical analysis etc, I simply recommend a demo account with Futures, or a small real account of Forex, and then taking it from there. But take it from me, daytrading Futures is MUCH easier than Forex, also because it is much cheaper :).

      Bests,
      M

      • Hi Moritz,

        Thanks for your replay. I will look into that. One last question, related to the platforms, any advice for Mac user with the possibility of using the volume/tick bars trading?

        • Hey Bert,

          the only platform I know is ThinkOrSwim to run on Mac which is actually usable. I use Win10 on a virtual machine with Parallels.

          Bests,
          M

          • Hi Moritz, thanks. I use Parallels also but do not really like it. Doesn’t make my mac run good/smooth. I will check out ThinkOrSwim.

            Have a great day

            B

  9. Hi Moritz,

    Great article appreciate your work! I currently trade using a spread betting account but am looking into futures. Since I usually take trades based off H1 charts I generally don’t get into them for less than a few hours so entry does not need to be as pinpoint as it would if I was scalping. Due to this do you think levels are similar enough between spread betting platforms and futures charting so that I could locate a trade on futures (via DOM/futures charting) but actually take the trade on spread betting broker?

    Thanks,
    Al

    • Hey Al,

      I never got into Spreadbetting so I can’t really say whether the charts are similar for similar products – I suggest you simply make a comparison and see whether that works :). I can say it mostly works for CFDs and Futures, for example!

      Bests,
      M

  10. Hi Moritz,

    Would you be bringing back your trading journal & videos? Lots of gold to be learnt there. It’s a shocker to see it’s off tradeciety, but I get this may be an artistic direction thing. I sincerely hope you will revive it in some form though. Learnt plenty from you thru your journals & vids.

    ebie

    • Hey Ebie,

      it will be revived in the first week of January. Yes, we decided to restructure the content and re-do a lot of it due to the direction we are going to go with TC in 2017. It will come back better and stronger and also applicable to the Forex markets, not just the Futures markets :). Stay tuned!

      All the bests,
      M

  11. Good article, am a forex trader looking for easier haven to get more cash. Can futures be traded using mobile phone on android device just like we trade mt4 on mobile adriod device

    • Hi Adewale,

      Metatrader 5 recently made the move to futures, so maybe they have a mobile platform, too – not sure though :).

      Bests,
      M

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