Currency Futures Basics
What are the Futures Markets?One active market for day trading are the futures markets. The reason for this is that they are strongly regulated leveraged instruments.
Currency futures are traded at the Chicago Mercantile Exchange in the US. What are Currency Futures Contracts?Futures markets trade currency futures contracts. Futures contracts say that that the underlying currency will be bought or sold for a certain price on a particular date in the future. This future date is known as the expiration date. Day traders make money, or lose money, in a currency futures trade by calculating the difference between the buying price and the selling price. If the buying price is lower than the selling price, the day trader will make a profit. If the buying price is higher than the selling price, then the day trader will lose money. The day trader does not make a profit by actually owning the currency. It is also very important to know the currency futures expiration date, so that the currency futures trader does not have any open contracts on that date. Currency futures contracts can be used for intraday trading and swing trading. Currency Futures Trading Symbols
The trading symbol for futures markets consists of the underlying contract, the expiration date, and the exchange. For a more detailed listing for currency futures contracts Click Here.
EUR-200710-GLOBEX
Euro to US Dollar currency future that expires in October 2007
Contract Specifications
The contract specifications for futures markets include a few things:
-
Tick Size = minimum price change
- Multiplier = point value
FOR EXAMPLE
The tick size for the EUR is 0.0001
The multiplier is $ 125000
Therefore the value per tick is
0.0001 X $ 125000 = $ 12.50 per tick.
This means that for every 0.0001 in price change, a trade's profit or loss would change by $ 12.50.
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