Understanding the differences between forex and CFDs vs. futures is key if you want to begin trading in this area. The primary difference between cash forex and currency futures trading is that currency futures are traded on a well-regulated centralized exchange with standardized contracts with full price and order discovery. Whereas cash forex is traded on a mostly unregulated decentralized market with little price discovery or transparency and where your forex broker often takes the other side of your trade.

There are always risks in all types of trading. Prices can move against a trader’s position quickly causing potentially large losses, so it is imperative to always trade with a risk management in place including stop losses or trailing stops. There is also an added safety of funds when trading currency futures through a licensed futures broker. Such protections are not always in place when trading cash forex. Understanding the differences in CFDs vs futures is crucial for managing risks effectively.

In an unregulated environment cash forex dealers can offer any amount of leverage that they want exposing their customers to extreme levels of risk. Currency futures leverage is based on the volatility of the unique instrument and provides a significant amount of leverage. With leverage comes the potential for greater profits but also the potential for greater losses.

CFD (Contracts for Difference) trading is NOT legal in the United States due to strict SEC regulations. In fact, many brokers who specialize in CFDs will not accept United States residents as clients.