The difference between forex and futures trading in Hong Kong is that forex trading can be done entirely online, whereas you must trade-specific futures contracts through the local exchange.
What are futures?
Futures are financial instruments that require someone to take on a commitment or obligation (to “take delivery”) at an agreed-upon later date (expiration).
Futures typically have specific details for how you may use them. They can be physically delivered if needed, which commodities are acceptable, whether or not there is a minimum amount of product one must purchase & transport (if applicable), etc.
What is forex?
Forex stands for Foreign Exchange. Forex trading is the simultaneous buying of one currency and selling of another.
The simplest analogy would be trading US dollars for Euros. Why would you want to do this? Because one currency will typically rise in value when the other falls, by simultaneously purchasing a foreign currency & selling your own, you can capitalize on the change in exchange rates between two countries.
Forex traders have no delivery requirements or future contracts because it does not involve delivering actual goods/commodities later (futures) but rather exchanging currencies between countries (forex).
It is important to note that even though people can trade forex online, most have an expiration date that you must meet for the contract to become valid (typically between 3-12 months).
Although you can do futures trading with local exchanges in Hong Kong, it would require the involvement of a broker who will find/execute trades, file paperwork with the exchange & keep track of all agreements. Specific hedging strategies require “physical” commodities, which you must store until the expiration date.
Differences in Traders
Forex is probably your best bet if you are new to trading because it does not involve any physical delivery (requires no storage). There are no minimum deposit amounts required.
Additionally, more reputable companies offer online training for people who want to learn how to trade forex.
When it comes to learning how to trade derivatives like Forex or Futures, you need to look for reputable companies that offer training programs.
Get all your information before you start because it can be challenging to get any more classes after investing.
If you are brand new, I recommend finding a class that teaches about different strategies that people use when they are just beginning.
You also want to consider how the company is being run/managed because not all managers follow rules that can lead traders up a river without a paddle if they ever come across any legal trouble further down the line.
If you do not know anyone who can recommend a reputable company, I suggest finding one online that is beginner-friendly and offers training. This will help protect you against fraud because there are many people out there who take advantage of opportunity seekers like yourself.
A difference between Forex and Futures trading is that with futures, traders have to pay a premium to purchase large quantities at one time & forex has no delivery requirements or future contracts associated with it.
Another big difference between both types of trading is that brokers must file paperwork with the exchange & keep track of all agreements when it comes to futures trading. In contrast, in forex trading, things remain a little more relaxed so long as they keep any contracts within the platform that they are using.
But the most significant difference between both types of traders is that futures traders cannot start trading without having at least 25 million HKD in their account. In contrast, forex traders do not need any deposit or minimum value amount.
Before you deposit an online brokerage firm, it’s essential to pick a company with a reputation for integrity and fair-dealing practices. For Forex & Futures trading, don’t hesitate to research brokers before opening an account with them. Try it now.