The market where different country currencies are frequently traded is called the Forex Market. Exchange of currencies being pertinent to global trade, makes Forex trading is the most preferred type of investment and speculation on account of its innate ability for the trader to make quick buck, exploiting the slightest change in one’s country currency.
This need makes Forex markets to be the largest and the most liquid form of financial markets, all over the world. Transcending the scope of even the stock market, Forex markets forge ahead with an average traded value of more than U.S. $2,000 billion which accounts for a daily count of transactions. The uniqueness of forex transactions is the absence of a centralized market place where the exchange happens. Traders hence are facilitated by OTC (over the counter) transactions which make use of computer terminals spread across the globe, rather than a single centralized exchange. The major financial centers operating Forex Armada markets provide their exchange services catering to almost every time zone, regularly featuring the fluid dynamics of the price quotes.
Online Forex Trading
The evolution of online Forex trading platforms has revolutionized global financial markets. These are viewed as the most preferred tools for traders who are keen on making money from the comfort of their home in order to make profits. Just with the push of a button, not only can the broker earn substantial profits, these online forex platforms are also sources for free technical analysis, historical and live tables, charts and graphs, thus providing information for a better understanding.
Different Forex Tools: Spot
Identified as one the most common types of Forex trading, a spot transaction is a two-day delivery transaction which represents a “direct exchange” between two currencies. Operating in the shortest time frame, spot transactions basically involve liquid cash rather than a contract. Another feature of spot transactions is the absence of interest which does not form a part of the agreed-upon transaction.
Engaging in a forward transaction is a procedure to combat and deal with the foreign exchange risks. Forward looking, here the buyer and seller agree on an exchange rate for any predetermined date in the future, which can be anywhere between a single day to lasting for years together. The transaction then happens on that date, regardless of the market situation. The date in agreement with both parties sees the successful completion of the forward contract.
Another widely used forward transaction is the Forex swap, which calls for two parties to exchange currencies for a certain length of time. Swapping happens as a reversal of the transaction at a later date. Given the ambiguity, these don’t make their presence felt in a forex market. The only precautionary measure is in the form of a mandatory deposit to be made to keep the position open until the completion of the transaction.
In contrast, Futures as the name suggests are standardized forward contracts, which are usually traded for about 3 months, with contracts including interest amounts. Hence currency future contracts are contracts dealing with a standard volume of a particular currency which can be exchanged on a predetermined. Patronized by MNCs, these are the best hedging options for stabilizing their currency positions.
Being a derivative market, a forex options in Armada markets is the largest liquid market globally. These options provide the trader a legal right but not an obligation to exchange money of one currency into another currency at a pre-agreed exchange rate, with the settlement happening on a specified date.
Success in the forex market largely depends on an investment strategy, which is different for each person, clearly resting on his priorities.