InstaForex Currency Futures - What's the Catch?

InstaForex, the most active broker in Asia at the end of 2020, opens the market of unique balance currency derivatives. The company's clients have access to a trading platform with futures on popular financial and commodity assets of the Forex market.

EURUSDweek and EURUSDmonthly became the first instruments launched by broker InstaForex. The futures trade over the course of a week or a month. InstaFutures quotes are formed depending on traders' bets on what the euro-dollar pair's close will be at the end of their expiration period.

What kind of instrument is this, how can ordinary currency speculators trade it, what are the pros/cons and pitfalls of the new asset - in our today's article.

Instaforex futures have a number of unique features:

An InstaForex future is a derivative instrument whose four-digit quotes are limited by a minimum value of zero and a maximum value of one. The EURUSDweek or EURUSDmonthly rate can never be higher than 1,0000, regardless of what values the underlying euro-dollar asset takes on the Forex market. 

The price of InstaFutures depends on the underlying asset only very relatively. Traders trading EURUSDweek or EURUSDmonthly make trading decisions based on a forecast or visual change in the euro-dollar rate. 

However, the trends of the euro-dollar and InstaFutures may differ because of low activity, liquidity, or because one of the price boundaries of 0,0001 or 0,9999 has been reached. The future simply has nowhere to fall or rise even if the euro-dollar keeps falling or rising further.

One can only assume that a strongly rising weekly trend will lead to a flow of EURUSDweek purchases, lifting its price above 0,5. Obviously, a fall in the EURUSD pair will push EURUSDweek quotes below 0,5.

The exact value of the future is formed by the balance of supply and demand, as well as by the volumes of real trades made by InstaForex clients. The broker does not take part in trading, providing only order processing and charging a fixed commission - 1% from each trade.

Traders of InstaForex independently form the spread by placing limit orders. They enter the order book or the so-called market depth and remain there until an opposite order with a similar price or a trade with immediate execution conditions appears in the market.

The triggered order moves to the tape of all trades, which together with the order book can be observed through the functionality of the InstaForex Webtrader terminal.

A trader must definitely use the order book when trading InstaForex futures. The spread on this instrument is floating and fully dependent on market liquidity.

Unlike the trader-familiar Forex market, the best price for a short or long visible in Metatrader may have low volume. A market trade with a large lot will sweep several price levels, as a result of which the trader will make the trade at a worse rate.

The figure below shows that an attempt to sell $36 at market will "drop" the rate from 0,9415 to 0,9400. On the buy side, the EURUSDweek order book is more liquid. A market purchase for $36 will lift the rate from 0,9923 to 0,9925.

From the example above, it is easy to guess that 0,01 lot will always equal $1. Trading with such a lot size, for the closing of 10 pips (0,010) of EURUSDweek, a trader will receive $0,1 of profit.

The maximum possible loss from trades with a size of 0,01 lot will never exceed $10. This is a major advantage of the limited range of changes in EURUSDweek quotes.

More detailed information on calculating lot value, profits, and losses for InstaFutures can be obtained on the website page with the EURUSDweek calculator.

Launch the Metatrader 4 or 5 trading terminal from broker Instaforex. Move the mouse cursor over the Market Watch window located on the left and press the right button to call up the additional menu. Select the Symbols option from the drop-down list.

In the window that opens, find and open the Currency Futures section. Check the selected type of futures (weekly EURUSDweek or month-long EURUSD monthly) and click the Show option. The selected instruments will be added to the Market Watch list.

The InstaFutures features described above open up opportunities to use unique strategies with a high probability of profit. The simplest and most promising tactic of currency speculation is to apply the oscillator trading approach.

Given the limited range of InstaForex futures values located from 0 to 1, traders can open countertrend trades in overbought and oversold zones. In oscillator trading theory, such levels are considered to be the following SELL/BUY zones:

Because of the oscillator type of the EURUSDweek future, traders do not need to choose a timeframe, period, or use an indicator. It is enough to plot the selected pair of levels in advance on the weekly futures chart, as shown in the screenshot below.

As can be seen in the presented example, only one of the 12 trades closed at a loss. Entries were made at the extreme pair of levels 0,8/0,2 - this way of trading is safer.

The number of positions can be increased by combining a lower entry threshold value (0,7/0,3 or 06/0,4) with technical analysis of spot quotes for the EURUSD pair. They will make it possible to predict a market reversal in advance, justifying trades on EURUSDweek in overbought/oversold zones.

The EURUSD spot chart can be used as an indicator for finding and trading divergences with EURUSDweek. The rate of the real asset of the Forex market is determined by huge interbank liquidity, unlike EURUSDweek, where only the funds of part of broker Instaforex's clients participate in trading.

The figure below shows an example when, on the hourly candles of December 23, the EURUSD spot market showed a rising trend during the day. Participants in EURUSDweek trading lacked the volume to "overcome" the positions of short sellers, and the rate ended up 10 times below the opening level of the daily candle.

In 10 out of 11 cases, buying the Instaforex futures in the negative zone brought profit. The given example reveals the advantages of high-frequency trading for this instrument. Holding a long all day would have led to a loss. As can be seen in the figure above, the EURUSDweek rate ended the day in the red, despite the positive close of EURUSD.

Relatively low (compared with Forex) liquidity of trading in Instaforex futures makes scalping trading profitable for a wide range of this broker's clients. It is enough for a trader to use the order book and the tape in order to conduct a series of profitable trades.

The most common type of order-book trading is hunting for the spread. Pay attention to the top line of the picture located below. The difference between buying and selling is 27 points, so traders will wait for the spread to narrow before entering a trade.

If a trader-scalper begins placing pending orders inside the spread, in our case a Sell limit below 0,9989, then in the end his order will be "taken" by grateful lovers of trading "at market".

As soon as the position opens, the scalper should immediately work on the take profit, narrowing the spread with orders priced (in our example) above 0,9562. Which direction to trade the trend will be suggested by the overbought/oversold situation or divergence (the corresponding examples are discussed above).

Another option for scalping tactics can be opening positions in front of strong support/resistance levels. They are visible in the order book in the Value column.

In the picture above, reliable resistance is located at 0,9999, where traders accumulated $8612 of sell orders. If the EURUSDweek price starts to fall, it will be stopped by support at 0,9500, where $358 of longs have accumulated.

Scalpers place their orders in front of these resistance and support levels, earning in the process from the flat. At some point, the price approaches one of the levels, but a large cluster of orders is a guarantee of a rebound, which should be used by the trader to close the current loss. The test of the level itself signals that the market is preparing for a strong movement.

A future trend may be indicated by the speed at which the volume of pending orders at support/resistance levels is being "taken apart." The tape of all trades, located to the left of the order book, helps track the activity of buyers or sellers in more detail at this moment. By the size of tick volumes, the scalper can determine the stability of the level and the need for an emergency closing of his positions.

The futures launched by broker Instaforex are unlike the instruments traders are used to, which forces them to look for new approaches in their work. On a superficial acquaintance, EURUSDweek is off-putting because of this:

Having understood the features of these futures, traders quickly identified the advantages of this instrument:

In addition to the weekly EURUSDweek futures, an instrument with expiration at the end of the month, EURUSDmonthly, has appeared. This opens up opportunities for the trader for calendar arbitrage on the difference in their quotes.

They will necessarily differ at the beginning of the month and fully coincide at the end, in the last week. This difference can be captured with pair trading - the simultaneous opening of positions to buy one instrument and sell the other.

If the assembled structure does not bring profit at the end of the week, the "burned out" futures can be "restored" by opening trades again at the beginning of the next week. This tactic is called rolling, and it will help cover the weekly loss through the profit of subsequent weekly futures or the profit of EURUSDmonthly at the end of the month.

Instaforex futures are an interesting instrument for beginner traders. Visualization of the order book and trade tape will help a newcomer understand the mechanism of trading and the formation of the exchange rate of currency pairs.

Instafutures are an excellent replacement for cent and demo accounts. A trader can calculate the size of potential losses in advance thanks to changes in quotes within a limited range.

Forum topic

Best regards, Ivan Petrov
Tlap.io