Managed Forex vs Managed Futures

Managed futures refers to the trading of futures contracts under a managed account structure.

A futures contract is a form of "derivative" – that is, a tradable instrument that derives its value from the price of something else; for example, oil futures derive their value from the price (known as the "spot price") of oil itself.

Managed currency futures accounts trade currency futures contracts instead of the actual spot currencies that are traded in managed FX.

Here are some advantages of forex over futures when it comes to managed accounts:

  • Greater Liquidity – Spot FX is more liquid than currency futures ($4 trillion in daily trading volume versus $30 billion a day respectively). Higher liquidity makes it possible for a professional manager to get in and out of larger positions easier and quicker.
  • Longer Trading Hours – Spot currencies trade from 5:00 PM EST on Sunday until about the same time on Friday, so it's 24 hours a day of trading activity during five and half days a week. Most futures contracts open and close every trading day, so there are times when a futures portfolio manager won't have access to the market, exposing himself to price gaps and being unable to exit positions.
  • No Limit Up / Limit Down – In the spot forex market, there are no artificial price controls of any kind. This is not the case in the futures market, where restrictions come into effect when the price of a commodity moves up by a maximum amount ("Limit Up") or down ("Limit Down") in one trading day. When this occurs, traders cannot open new positions, only liquidate existing ones. This makes spot currencies much "purer" and "cleaner" market for money management.
  • Access to Higher Leverage – Forex provides traders the option of utilizing much higher leverage levels than is typical in futures. Even though increasing leverage multiples both potential return and risk, the trader has the flexibility of utilizing a much wider leverage range, based on the amount he considers acceptable for a given strategy or combination of strategies.