Stocks and Commodities Magazine

Leverage...More of it in FOREX or Currency Futures?

Is there more leverage in currency futures, or FOREX?

For those that aren’t aware, there are at least two completely separate venues for currency speculation; exchange traded currency futures, and off-exchange FOREX. Equity market ETFs come in a distant third in regards to popularity and efficiency. There are certain advantages and disadvantages to each arena, in fact we’ve touched on that topic in a previous edition of this column, but when it comes to leverage and margin there isn’t a clear cut winner.

Let me first start by saying that more leverage, which is equivalent to a lower margin requirement, isn’t necessarily preferable. In fact, higher leverage is a sure-fire way to decrease the odds of trading success. With that said, it is important to be educated on the margin requirements in each venue.

Currency Futures

Although the Intercontinental Exchanges offers some currency futures products, when traders speak of currency futures the general assumption is the CME Group’s suite of foreign exchange products. The CME Group traded currency futures require specific margin deposits. These margin deposit amounts are determined by the CME Group itself. Each futures brokerage firm offering CME Group currency futures to its clients must charge their clients a performance bond in, at least, the amount the CME Group has designated as the margin. Some brokerage firms will actually ask clients to put down more margin than is required by the exchange. This is known as an “up-charge”. If your broker does this, you should probably look for a new broker simply because it insinuates corner cutting by risk management, and there is no telling where they are doing so in other areas.

Margin vs. Day Trading Margin

Here is where things get tricky; clients that are day trading currency futures are likely granted a margin requirement lower than the exchange designation by their brokerage firm as long as they close the position at the end of the trading day. This is known as day trading margin, and can range from half of the exchange posted margin to as little as 5 to 10%. Specifically, if the margin to trade 100,000 units of the Euro against the dollar (equivalent to 1 full-sized futures contract) in the futures market is $3,400 a futures broker might let you buy or sell a contract with $1,700 or less in your trading account assuming you exit the position before the end of the trading session.


Read more about where you get more leverage when trading in the August 2015 issue of Stocks & Commodities Magazine



DeCarley Trading on Twitter

Carley Garner Trading Books

  • Higher Probability Commodity Trading, new Carley Garner book

    Higher Probability Commodity Trading, new Carley Garner book

    According to Phil Flynn, Fox Business News contributor, this is Carley Garner's "masterpiece"! Order from Amazon today! "A great read for both beginner and advanced commodity traders. Carley nails the seemingly impossible task of leveling the playing field by imparting vital concepts in easy to digest bites ...she doesn't leave out the harsh realities and heartbreak many overzealous speculators face." -- JON NAJARIAN, co-founder "I love the book... it's an MBA in trading for the
    Read More
  • Commodity Options the Book

    Commodity Options the Book

    It isn't free, but it's close! If this book saves you 2 ticks, you've recouped your investment.   Commodities are hot, as Jim Rogers would say.  Stagnant stocks and the massive bull rally in raw commodities have lured much of the attention away from Wall Street and toward down-town Chicago.  It is difficult to turn on the television or open the newspaper without being reminded of the impact that commodity prices have on our daily lives.   Traders
    Read More
  • A Trader's First Book on Commodities

    A Trader's First Book on Commodities

    The Simple, Practical, 100% Useful How-To Guide for New Commodities Traders   Before you trade commodities, you'll need significant practical knowledge of the associated risks and market characteristics. That's where this book comes in. You won't find boring theory or bewilderingly complex trading strategies here. Instead, you will find specific guidance on accessing commodity markets cost-effectively, avoiding common beginners' mistakes, and improving the odds of successful trades. Drawing on her extensive experience teaching traders, Garner shows how to
    Read More
  • Currency Trading in the FOREX and Futures Markets

    Currency Trading in the FOREX and Futures Markets

    Get a copy of Carley Garner's latest book at, or any major outlet! "Once again, Carley Garner demonstrates her ability to boil down complex concepts for individual traders. Trading Currencies in the FOREX and Futures Market will put budding currency traders ahead of the curve with its unique blend of the basics and some refreshingly unexpected material." ~ Karris Golden, Traders Press® "Carley is a smart trader and broker; she understands the markets and the importance of
    Read More

Newsletter Trial