there's a perception of "simpler".. i get 1 tick = i get x$
no greeks, calendar/vertical/iron condros, ... no complex fundamentals & P/E and EPS... to worry about..
(disclaimer: i don't trade futures..)
RedK

Luger 

Taxes: 60% long term gains / 40% short term gains no matter the holding period on broad based index futures. Less going out to the tax man is a nice boost when compounding returns. Also, no wash sales or other tax headaches like with equities.

Does this mean you PAY 60% or 40% in taxes??

tderrick 

Does this mean you PAY 60% or 40% in taxes??

No, on broad based index futures your tax rate is on those products is a combination of the short term and long term capital gains rates. Section 1256 contracts are what the IRS calls them.

Example:
I am in the 25% bracket, I am profitable trading, and I am deciding what product to trade.

Tax rate on broad based index futures = (60% * 15%) + (40% * 25%) = 19%
Pay IRS $190 for every $1,000 made.

Tax rate regular short term capital gains (equities, options, etc) = 25%
Pay IRS $250 for every $1,000 made.

For those people in the higher brackets it is even more valuable:
In the 35% bracket, broad based index futures gains are taxed at only 23% instead of 35% for equities, etc.

There are definitely tax advantages for futures, not just in terms of $ but also time and simplicity.

But those advantages only apply to the few traders that are actually profitable. So if you are not yet profitable or a new trader, I still think equities are where you should start.

Mike

Luger 

No, on broad based index futures your tax rate is on those products is a combination of the short term and long term capital gains rates. Section 1256 contracts are what the IRS calls them. Example: I am in the 25% bracket, I am profitable trading, and I am deciding what product to trade. Tax rate on broad based index futures = (60% * 15%) + (40% * 25%) = 19% Pay IRS $190 for every $1,000 made. Tax rate regular short term capital gains (equities, options, etc) = 25% Pay IRS $250 for every $1,000 made. For those people in the higher brackets it is even more valuable: In the 35% bracket, broad based index futures gains are taxed at only 23% instead of 35% for equities, etc.

Oh, I like that!! I was getting nervous...

We need to get together for a coffee one morning

Thanks @Luger

Added spot forex to the mix.

Mike

Big Mike 

There are definitely tax advantages for futures, not just in terms of $ but also time and simplicity. But those advantages only apply to the few traders that are actually profitable. So if you are not yet profitable or a new trader, I still think equities are where you should start. Mike

That was one reason that I mentioned "profitable" in my example. I agree that people should get their experience on equities when first getting involved with trading. No sense in getting killed by leverage before you even get started good.

Leverage is a double edged sword. Don't learning to swing a sword using a double edged sword, you will just cut yourself...

Hi,

FOREX has no centralized volume, so is not necessarily a relevant instrument for those who have methods relying on volume, either on the short-term (tape, DOM) or on more longer-term (VSA, etc.).

Futures allow more margin. For the same amount of risk/gain, it allows having less capital on the broker's side, and consequently reduces the risk incurred in case of bankruptcy of the broker.

I have heard that dark pools and in-house clearing (broker matching orders) are more wide-spread on equities than futures, which has impact on the interpretation of the volume. But I am not very sure of this last point.

Nicolas

Why not spot forex? Experiences like this:

help explaining Dukascopy failed fills Hi there, I need some help here getting on the clear what should I expect when I trade the Forex market place via ECN broker like Dukascopy. I have just had a very long chat with one of their support staff and am not satisfied with the explanation. Here …

These things happen all the time. When you deal with spot forex, you are dealing over the counter with a person who is unregulated and answers to no one except you and unmotivated in any way to have you succeed (as they are usually the couterparty to your trade).

I would rather trade the e-[AUTOLINK]micros[/AUTOLINK] at the CME than deal with the snakes in the forex business, and this is probably the best alternative IMO.

Plus, at least then you have some depth of market and a tape with actual transactions, instead of a black box of price only in OTC forex, where the dealer can quote whatever the hell they want. I would wager to guess that 90% of forex traders have no clue about how their market actually works, and that is exactly how the dealers want to keep it.

josh 

Why not spot forex? Experiences like this: help explaining Dukascopy failed fills Hi there, I need some help here getting on the clear what should I expect when I trade the Forex market place via ECN broker like Dukascopy. I have just had a very long chat with one of their support staff and am not satisfied with the explanation. Here … These things happen all the time. When you deal with spot forex, you are dealing over the counter with a person who is unregulated and answers to no one except you and unmotivated in any way to have you succeed (as they are usually the couterparty to your trade). I would rather trade the e-[AUTOLINK]micros[/AUTOLINK] at the CME than deal with the snakes in the forex business, and this is probably the best alternative IMO. Plus, at least then you have some depth of market and a tape with actual transactions, instead of a black box of price only in OTC forex, where the dealer can quote whatever the hell they want. I would wager to guess that 90% of forex traders have no clue about how their market actually works, and that is exactly how the dealers want to keep it.

And with the Minis/Micros, all the other benefits of futures previously mentioned, exchange safety, transparency, margin, leverage, taxes, etc still apply too. I've been thinking of looking into swing trading other commodities like gold/silver etc through the micros to get started trading them with less $ than the full contracts require. And I don't think slippage/commissions/liquidity would be an issue for swing trading.