Skillsfirst Level 5 Diploma in Financial Trading (RQF) - Module 1 - Trading Introduction
Skillsfirst Level 5 Diploma in Financial Trading (RQF) - Module 2 - Financial Products
Skillsfirst Level 5 Diploma in Financial Trading (RQF) - Module 3 - Economic Principles
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Forex futures (unlike Forex spot transactions) are traded on regulated exchanges, and all transactions have standard contract sizes and maturity dates. Forex futures buyers and sellers are required to post initial margin or security deposits for each contract. Like all futures contracts currency futures are defined as a standardised contract/agreement to buy, or sell a specific amount of a currency at a particular price on a stipulated future date. As with all futures the currency future is derived from the underlying product, which in this case is the currency cash market. Click on the toggles to learn more.

Currency futures started in 1972 and were developed after the 1971 volatility in currency trading which arose from the shift from fixed to free floating currency exchange rates. Futures contracts offered an alternative to the forward market and were designed for a few major currencies.The advantages of futures are smaller contract sizes and the high degree of liquidity for small transactions, and the disadvantages include the inflexibility of both standardized contract sizes and maturities, and higher costs on large transactions.

Futures differ from Forwards, because credit or default risk can be virtually eliminated. Instead of conveying the value of a contract through a single payment at maturity, any change in the value of a futures contract is conveyed at the end of the day upon which it is realised. In futures markets, the futures contract is cash settled or marked-to-market daily. As we mentioned above, margin is posted and any gains or losses are added or deducted from the margin account at the end of the trading day. If the margin falls below an agreed minimum, the holder is required to replenish the margin account or the holder’s position will be closed out.

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