Many new Traders may need to learn the difference between Futures and Forex trading. When I first started on my trading journey, it was never brought to my attention, so I wasn’t prompted to investigate. I learned the hard way by spending a lot of time using an unregulated broker and not knowing that I was being taken advantage of. I have years of experience trading with regulated and unregulated brokers, and this article will outline why I trade Futures instead of Forex.
S&P CFDs Trading
I started learning to day trade the S&P (Standard and Poor’s 500) index in 2018. I began by daytrading the S&P CFDs (Contract for Differences). A CFD is an agreement between a Trader and a CFD broker to exchange the difference in the value of a financial product (for example, gold, indexes, oil). Investors use CFDs to trade on whether or not they feel the price of a financial product will go up or down. The investor’s gains or losses are settled through the Trader’s brokerage account.
The CFD Industry is Not Highly Regulated
The CFD industry does not have strict regulations. Thus, many unregulated brokers are allowed to operate. Due to weak regulations, CFDs are banned in the United States. Some countries only allow Traders to use regulated brokers, while some countries allow access to both regulated and unregulated brokers.
I started to practice trading the S&P CFDs on a demo account. When I felt ready to trade using real money, I had to find a broker. I went to a Trading school, and many students were using a particular broker to day trade S&P CFDs. I followed the other students and deposited money to fund my Trading account with this broker. I did not know at the time that this broker was unregulated.
Market Price not Transparent with Unregulated Brokers
While using this unregulated broker, I started noticing some things happening often:
- As the Price would move down towards my Stop Loss (SL) level, my SL would get hit, taking me out of a Trade, and then start running toward my Take Profit (TP) direction
- While waiting for the Price to reach my TP level, my trade would sometimes close early before I could lock in profits
It was very frustrating to miss out on a lot of good trades. I looked into why this was happening and found that this unregulated broker can control the price spreads. An unregulated broker also can change the price spread from trade to trade!
A significant difference between Futures and Forex trading is that Futures trade on centralized exchanges such as the CME (Chicago Mercantile Exchange) and CBOT (Chicago Board of Trade). There are rules to have the market price set at a specific price that regulated brokers must follow. For example, ¼ tick of the S&P ES futures is worth $12.50. A Trader buying the ask would be required to pay a $12.50 spread.
Forex trades on decentralized exchanges with no set price required. Since unregulated brokers are not required to show your trade order price in a centralized exchange, you could be buying at a bad market price. What’s worse is that some brokers have a conflict of interest to widen the price spread so they can benefit from you losing.
Regulations ensure transparency of the market price. Regulations can protect you from companies taking advantage of you.
Market Volume not Transparent with Unregulated Brokers
Another big difference between regulated and unregulated brokers is market volume transparency. Futures exchanges must publish all orders (bids and offers) waiting to be filled. At the same time, unregulated brokers are not required to show the depth of the market. Traders can have the advantage of having a better sense of supply and demand at different price levels with Future exchanges.
Measuring Risk to Reward and Position Sizing Not Possible with Unregulated Brokers
It was unnerving to me that price spreads can change from each trade with an unregulated broker. One of the first things I learned at the trading school was that it was critical to determine your risk-to-reward ratio before getting into a trade. With a set market price in Futures, I can figure out my risk-to-reward ratio on every Trade and determine my position sizing with every Trade in Futures.
If unregulated brokers could change the price spread on every trade, it would be impossible for a Trader to measure the risk to reward on each trade. I would rather be on an even level playing field with other Traders with Futures. I did not want the outcome of my Trades to be at the mercy of unregulated brokers.
Personal Account Instability with Unregulated Brokers
When I was sim trading the S&P CFDs, I used a Trading platform called MetaTrader. It should be noted that the MetaTrader Trading platform has regulated and unregulated brokers using it. MetaTrader does not control the price spreads; it’s the brokers using the MetaTrader platform who control the market price.
As previously mentioned, CFDs are banned in the United States. In December 2023, the company of the MetaTrader platform, MetaQuotes, began removing the unregulated brokers from their platform. Many Traders using these brokers reported significant issues such as being unable to withdraw their funds, the MetaTrader or broker account crashing, and getting logged out unexpectedly on MetaTrader. The affected Traders had to find another broker that MetaTrader allowed to use their platform. Traders need to be aware that there can be instability in using their accounts with an unregulated broker.
Trading Futures on the NinjaTrader Platform
As many of you know from blog “My Trading Journey“, I had an S&P Trading Coach named “Carol” (pseudonym) who used the Fibonacci indicators. Carol traded Futures using the NinjaTrader platform. She never told her students why she traded Futures instead of S&P CFDs. After I researched unregulated brokers, I began to see why my Trading coach was trading Futures instead of Forex.
I felt so defeated when I realized that I would have to learn the NinjaTrader platform. I had already put in over 2 years of hard work trying to be successful at Trading using MetaTrader, and having to learn a new Trading platform was going to delay my progress.
My first challenge after getting NinjaTrader was learning the basics, such as how to set up my charts, add indicators, and place trades. I went online to look for tutorials, but there weren’t many videos. I mainly found forums where I would have to ask a question and wait for an answer. I went through a lot of NinjaTrader videos but felt like I was going down a rabbit hole without finding the answers I needed.
Importance of a Trading Community
After spending countless hours trying to set up the NinjaTrader platform, I decided to message a student named “Robin” (pseudonym) from my Trading school. Robin told me she had paid Carol for one-on-one coaching sessions to get her Fibonacci charts set up, and she didn’t mind showing me what she had learned. Robin took the time to help me, and it made a big difference. It is people like Robin in the Trading community that I am grateful for. Although your success in Trading solely lies with you, I realized the importance of making connections in the Trading community. I told myself that whenever I became successful at Trading, I would give back to the community in some way.
Trading Video Tutorials by Rose Excellence
I have been using the NinjaTrader platform to trade the ES Futures since 2019 and haven’t looked back. I recommend NinjaTrader to anyone who wants to daytrade the Futures market. For more information on why I use NinjaTrader, check out my blog “Why I Use the NinjaTrader Platform for Futures Trading”.
I created NinjaTrader video tutorials on my YouTube channel, Rose Excellence . My YouTube channel also has other Trading-related videos showing what I have learned on my Trading journey. I think back on all my struggles learning to trade and hope my videos will help new Traders in some way.
Business Coaching with Rose Excellence
There were many times I felt lost on my Trading journey. I would have succeeded faster with more hands-on coaching and guidance. I created a Business Coaching program to help new students learn financial investments more quickly than I did.
I often felt alone on my Trading journey, so I created a Discord group for retail investors to discuss ideas with each other. I believe there’s strength in numbers, and I want to build a community for retail investors to provide support and help one another. You will have better success in Trading by learning with others than by yourself. Traders can join my Discord group at this link:
If you would like more information about my Business Coaching program, feel free to send an email to RoseExcellenceCoach@gmail.com, and we will chat soon.
Thank you,
Rose 🌹