Joseph Charles Thompson#88

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What are forex futures and how do they differ from spot trading?

Forex futures are standardized contracts traded on regulated exchanges like the CME, obligating the buyer and seller to exchange a currency pair at a fixed price and date in the future. Spot forex, by contrast, involves immediate settlement between parties in the over-the-counter (OTC) market. Futures provide transparency, central clearing, and reduced counterparty risk, while spot offers more flexibility and liquidity. Institutions use futures for hedging and speculation, especially when regulatory compliance favors exchange-traded products. Retail traders often prefer spot forex due to lower capital requirements and higher leverage. Benefits: futures add regulatory oversight and clear settlement. Risks: less liquidity compared to spot, higher margin requirements. Futures highlight how forex trading adapts across venues depending on participant needs.