Futures For You  |  JUN 2007

Futures For You by Dan O’Neil

Stocks & Commodities V. 25:6 (57): Futures For You by Dan O’Neil INSIDE THE FUTURES WORLD Want to learn how the futures markets really work? Dan O’Neil, a principal at online futures and forex broker XPRESSTRADE (www.xpresstrade.com), responds to your questions about today’s futures markets. To submit a question, post your question to our website at http://Message-Boards.Traders.com. Answers will be posted there, and selected questions will appear in a future issue of S&C. MONEY TALKS I’d like to start trading foreign currencies, but I’m not sure whether the futures market or the spot forex market is a better choice. What are the pros and cons of each? With transactions representing nearly $2 trillion each day, the foreign exchange market affects almost every nation’s economy and is the world’s largest financial market. Many economic forces affect the world’s currencies, including interest rate differentials, domestic money supply growth, comparative rates of inflation, central bank intervention, and political stability. In times of global uncertainty, some currencies may benefit from perceived “flight-to-safety” status. Or if one country’s economic outlook or political conditions are perceived as strong by market forces, its currency may be firmer than another country’s currency. Financial institutions, investment managers, corporations, and private investors use both currency futures and transactions in the spot forex market as hedges to manage the risks associated with currency rate fluctuations, and to take advantage of profit opportunities stemming from changes in currency rates.

by Dan O’Neil