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Spot vs Forward


mswoo

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Hi all,

I have a few questions regarding spot and forward trades.

I know that if you place a spot trade, then you get can charged fees overnight as well as interest, if the trade is going against you. I also know that with forward trades, you have wider margins, so any charges are baked into the pie.

However, I was wondering, given that you don't actually know how long a position is likely to stay open for, if there's any advantage to placing forward rather than spot trades? Do any of you only place forward trades? Only spot? Why? Does one work out cheaper than the other and, if so, what determines this?

Any feedback/discussion would be much appreciated.

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Hi @mswoo, you pretty much have it there, the cost of the trade. Spot is cheaper for trades that are of a shorter duration while futures (and forwards for the FX market) are cheaper for the the trader who normally has trades open for the longer term. You will need to consider each in relation to your own circumstances.

Spots have tighter spreads but overnight charges while futures have wider spreads, no overnight charges but expire (usually quarterly) and rollover so you pay the spread again to keep them open. Forwards also have larger spreads, no overnight charges and a fixed expiry and can be customised.

Forwards are going to be more suited to FX trades of large size and long duration.

forw1.PNG.5b5f98f596e758c5596e5060a214b8b4.PNG

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Hi @Caseynotes, thanks for your reply. I'm trading FX (still using in demo mode, but hoping to go live in the next couple of months), and only just realised I was getting charged interest when looking in my history. As I'm also getting interest on positive trades, I wasn't too concerned at first, but it did get me wondering. 

For my circumstances, it may make more sense for me to place forward trades from now on, as I'm not day trading.

Those are some huge spreads though... ? Hope it'll be worth it in the long run (no pun intended because, of course, in the long run, it will be). Here's to longer lasting positions...?

 

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Hi @Caseynotes. Thanks for that.

After a month on the demo platform, I only discovered the forward tab yesterday!

Will definitely be entering my trades on the forward chart from now on - if only to see the difference in cost and margin. I suspect I'll be sticking to it - those negative interest and overnight charges, though not huge, are irksome. I realise emotion is not the best reason to do anything when FX trading, but still...

Presumably, this will be the same for the live platform too. I think I saw that only some pairs had a forward tab - can't remember which ones.

I'm discovering that there are certain things on the demo that I will not get when I go live... like the trailing stop option which I discovered a few weeks into demo trading. I'm still doing trailing stops manually on the demo though, just so that I maintain the habit.

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  • 5 weeks later...

 

36 minutes ago, rodney1 said:

you mentioned trailing stops on the demo platform can you exsplane in detail how  its acumplised.

rodney

Hi @rodney1  that will depend on which platform you are using. Trailing stops are not yet available on the share dealing platform or the old web based platform but are available on the new web based platform and the Prorealtime and Metatrader platforms.

@Djelibaybi, The old web based platform is being phased out though there are still many trading instruments that still need to be transferred over to the new platform, work on that was interrupted by the scramble to satisfy the new ESMA trading regulations. The same applies for work on the new share dealing platform.

The new platform is HTLM5 so does not need Flash or Java to run.

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