Forex vs futures: which should you trade?

Forex and futures both let you trade with leverage, almost around the clock. But they work very differently underneath, and those differences decide your costs, your risks and even your taxes.

The short answer

• Forex is simpler to start: tiny position sizes, no expiry dates, and only currencies (outside the US, also gold and other CFDs).
• Futures are traded on a central exchange, with one transparent price and real volume data, and cover far more: stock indices, oil, gold, bonds, grains, crypto and currencies.

Forex vs futures, side by side

• Where it trades: forex is over-the-counter, through dealers and banks, so prices vary slightly by broker. Futures trade on exchanges like CME, with one order book everyone sees.
• Costs: forex brokers mostly earn the spread, plus overnight swap fees. Futures charge a commission and exchange fees per contract, with tight spreads on busy contracts.
• Sizes: forex lots can be as small as 1,000 units. Futures come in fixed sizes; micro contracts (like Micro E-mini S&P or micro gold) bring them down to a tenth of the standard.
• Leverage: US forex is capped at 50:1 on major pairs. Futures leverage comes from the exchange’s margin, which differs by contract and changes with volatility.
• Expiry: forex positions don’t expire (you pay or earn swap instead). Futures expire, so you roll to the next month.
• Hours: forex runs from Sunday evening to Friday afternoon, New York time. Most CME futures do too, with a daily one-hour break. See CME trading hours.
• Volume data: futures show real traded volume; forex volume at your broker is only its own clients’.

Regulation and protection

In the US, forex dealers are regulated by the CFTC and NFA, with strict leverage limits, and offshore forex brokers that take US clients aren’t. Futures run through exchanges and clearinghouses, which stand between buyers and sellers, so you don’t depend on one dealer’s prices. See how to choose a broker.

Taxes in the US

Futures get the “60/40” rule: 60% of gains are taxed as long-term and 40% as short-term, whatever the holding period. Forex gains are usually taxed as ordinary income by default. The difference can be large for active traders; check with a tax professional.

Which suits you

• Choose forex if you want to trade currencies only, start very small, and avoid contract rolls.
• Choose futures if you want gold, oil or stock indices in the US, one exchange price, real volume and the 60/40 tax treatment.
• Many traders use both: forex for currencies, futures for everything else.

Next: the best forex pairs to trade and the best futures to trade. Try both with virtual money in our trade simulator.