Spot Market and Forwards and Future markets

There are three ways of trading forex by individuals, corporation and institution those are

Spot Market

Forward and Future market

The spot market is the largest one because it is the underlying real asset that forward and future markets are based on. In past futures market is more popular because it is available for individual investors for a long period of time.

But after the electronic trading was invented spot market became more popular among individual traders. Forward and future markets became more popular among companies which want to reduce their foreign exchange risk.

Spot market

In spot market currencies are buying and sell by traders according to the current price. The price can determine by supply and demand. When deal is finalized then it is known as “spot deal”. After a position closed settlement is in cash. Spot market deals with the percent transaction rather than future. Usually traders take two days per settlement

Forwards and Future markets

Forward and future markets do not trade actual currencies they deal in contracts and represent claims to a currency type, specific price per unit and future date for settlement.

INTRODUCTION TO FORIGHN EXCHANGE MARKET (2)

In foreign exchange market currencies are traded. Currencies are important to any one because currencies needed to exchange to conduct foreign trades and business. If you are living in USA and want to buy some vehicles from Japan you or the company which buy vehicles from Japan have to pay to Japan with Japanese Yen. As well as when travelling if American traveler travel to another country in Europe that person should have to pay with Euro not with USD inside that country because USD is not locally acceptable in European Countries.

Usually currencies need to change for day today activities this is the main reason for fx market becomes the largest financial market in the world.

And there is no central market place for currency trading in Fx market. In fx market Usually all the transactions done electronically through computer networks. Using computer networks all transactions done over the traders in all over the world. This market open all the 24 hours of the day, Five and a half days per week and trading done in major financial centers of London New York Tokyo, Zurich, Frankfurt, Hong Kong, Singapore, Paris and Sydney almost all the time zones involve in this market. So When this end in USA new one start in Hong Kong so FX market never sleep never stop active in every 24 hours of the day. So price quotes changes constantly.

INTRODUCTION TO FOREIGN EXCHANGE MARKET (1)

Foreign exchange market is called Fx or Forex in short, so trading in foreign exchange market is called Fx trading or Forex trading. Actually this is the most fast and exciting market. But in the past large financial institutions, Corporations, Central banks lead this foreign exchange market mainly and also so much wealthy individuals only involve in this.

But today everything has change because of internet. After the emergence of internet every individual or any one who has good knowledge about Fx trading can buy and sell currencies by using only one mouse click. It became so simple because of internet so anyone who has a high speed internet connection and a computer. But most important thing is trader should have good knowledge about this fx market.

In fx market daily currency fluctuation are usually very small. Most currency pairs move less than one cent per day. As well as in this Fx market leverage is high as 250:1 sometimes this kind of higher leverages are very much risky.

Because of extreme liquidity and higher leverage this became ideal place for lot of traders. Positions can be held for months and also can be closed after few minutes.

Forex market provides lot of opportunities for investors or traders who are new. This is just a basic knowledge about what is this fx market I’ll come with another post which introduce more about this.

Read every post in this blog about fx trading to gather knowledge on this.

Advantages of FX trading

There are lot of benefits and advantages of trading forex through this blog post I am going to discuss few of them

There are no clearing, exchange or government fees. Also there are no broker fees at all many brokers provide there service through bid-ask spread.

And forex trading allow you to trade your currency to the market without middle man you can do it directly

The transaction cost is also very little and usually less than 0.1% under normal market conditions

And forex market is 24 hour market and you can trade do transactions get details in any time. Use the internet and do trading any time as you wish

And another advantage is not like many other tradings this can done by any one who have a high speed internet connection and a computer