Question:  I just wanted to know which market is the better market to trade and why - The S&P 500 or the Forex market? - Marc Adelman

Answer:  Marc that is not an easy question as it is more a matter of taste.  Lets look closer…

1.  For starters both offer very high leverage.

2.  Both require a small amount of money to trade.  For example some forex firms will let you trade a full size forex contract for about $1000 - $1200.  Similarly many futures firms will let you trade 1 emini futures contract for $1000 - $1200 of margin.  Please note that margin requirements vary from firm to firm.

3.  Where they vary quite a bit is in daily volatility.   What I mean is that on any given day in say the British Pound/US Dollar there can be a 70 -150 pip average range for the day. That means the market will move in one direction $700 -$1500 during the course of the day.   Now take an average SP 500 emini day.  Most days the range will be between 5-10 points.  Since each point equals $50, the daily movement is between $250 - $500.  So you can see there is a huge difference in volatility.  The reason why volatility is so important is that it creates movement which offers the potential to make more dinero. 

4.  Now don't get too excited as this volatility is a double-edged sword.  Extreme and rapid volatility can lead to very unexpected large movements against your position.

5.  One thing I don't personally like about Forex is the commisions.  You always see brokers saying there is no commisions but that is not entirely true.  You see each time you enter a trade you pay the spread.  This is the difference between the bid and asking price.  In some of the major currency  pairs the spread  will be 3 pips.  If a pip is worth $10 then your account will immediately be debited the value of the 3 pips spread($30) each time you place a trade.  The spread can be 4, 5, 6 or more pips at times as well.  If you are an active trader these spreads add up real quick!

Now take the emini SP contract.  Many brokers now charge less tha $5.00 round turn.  Round turn refers to the cost of entering a trade and then exiting it later on.  So the cost of trading the eminis are way less.

6.  The forex market is often touted as a strong trending market.  Yes that may be true if you are looking at dailiy and weekly charts, but there is a lot of intra-day noise on charts like 5, 15 30, and 60 minutes.

7.  I also notice a lot of wild intra-day price spikes in the forex.  This is often due to market professionals running stops on novice and under capitalized traders.  The SP also has it's share of stops getting hit.

8.  An advantage to the forex is it is open more hours. This is great for traders who can't get enough of it.

9.  When it comes to trading emini futures I personally prefer the emini Dow and emini Nasdaq as I think they produce smoother charts.

10. Something I really like a lot about forex is that you can open an "mini" account for around $500.  This is not possible in the SP as there is usually a $5,000 minimum to open an account.  The mini forex account is also great practice without the huge risk as each pip is worth just a $1

11.  Another thing that is important is you have to like trading the market.  For example, some people live and breathe the S&P 500 market only and wouldn't consider trading anything else. 

But…   If it doesn't get you fired up, then pick another market that does. 

12.  Another difference between the forex and SP futures is the "cost of carry".  In the forex if you want to short the market and hold it for more than a day their is the "cost of carry". This is a daily fee you pay to hold the currency.  The fee is roughly 1/2 a pip per contract per day. Not that much but id does add up if you are trading multiple contracts and holding for a lot of days.  Now if you buy the currency and hold over night you actually get paid the same rate as the cost of carry. So overall it equals out.  In the SP you have no "cost of carry".

Obvioulsy there are pros and cons to each market and one isn't necessarily better than the other.  It really boils down to what suits your risk tolerance, profit goals, trading style etc.

Good luck in your trading Marc.

Peace & Prosperity!