Forex trading

Forex Trading

The market where global currency trading is called the Foreign exchange. Foreign business and trade needs foreign exchange to exchange currencies and is an important factor to a majority of people around the world. This applies to buying goods from other countries, travelling, and more. You need to change your currency to the currency that applies and is accepted to the country you are buying from or travelling to.

The forex market is the most liquid, largest financial market globally due to the constant demand to exchange currencies.

One distinct feature of forex is that there is no centralized exchange or no central market, and all transactions are done online between traders around the world. Trades in the forex market are done across the globe, across all time zones, 24 hours a day for 5 days a week.

Future Markets, Spot Markets and the Forwards

These three are the ways that individuals, corporations and institutions can trade forex.

  • Future Market and Forwards

These markets deal with contracts of claims to a definite type of currency, a specific future date to settle and price per unit.

Forwards market purchases and sells contracts between two parties OT who decide between themselves their agreements.

The futures market deals with contracts of public commodities market that are sold and bought with a standard settlement date and size.

These two markets offer security when trading currencies against risks. These both have binding contracts, and are typically used by big international corporations to safeguard themselves against fluctuations in future forex rates.

  • Spot Market

This is the market for buying and selling of currencies in relation to their current prices, which is also determined by demand and supply. This can be used to see economic performance, current interest rates, perception of the currency performance in the future of one currency against the other. The spot market deals with cash and transactions are in the present.