Different Ways To Trade Forex – Since Forex is a very popular and very large investment system, traders take advantage of their investment in this Forex market in various ways. The most popular of these methods are Spot Forex, Currency Futures, Currency Options, and Currency Exchange-traded funds (or ETFs).
Currency Futures!
Futures are a contract that you set a specific price for a particular type of asset BUY or SELL that will last a probable period. That’s why it’s called Futures.
FX futures were created by the Chicago Mercantile Exchange (CME) way back in 1972.
Since futures contracts are standardized and traded on a centralized exchange, the market is very transparent and well-regulated. This means that price and transaction information are readily available.
Currency Options
It is an economic system that allows a buyer to choose an instrument, does not impose any restrictions, and does not offer any BUY or SELL benefits on the expiration date. If a trader Sells one of the instruments, he/she will be able to Buy/Sell more within the expiry date/time.
just like futures, options are also traded on an exchange, such as the Chicago Mercantile Exchange (CME), the International Securities Exchange (ISE), or the Philadelphia Stock Exchange (PHLX).
However, the disadvantage in trading FX options is that market hours are limited for certain options and the liquidity is not nearly as great as the futures or spot market.
Currency ETFs
Exchange-traded funds or ETFs are the latest addition to the Forex trade.
A currency ETF offers exposure to a single currency or basket of currencies. Here’s a list of the most popularly traded currency ETFs.
Like currency options, the limitation in trading currency ETFs is that the market doesn’t operate for 24 hours. Also, ETFs are subject to trading commissions and other transaction costs.
Spot Forex Market
In the Spot Market, at the market price, the currency pair is traded “on the spot”. One of the biggest advantages of this trade is that it can be easily traded, liquidity is high, the spread is very low and it is open for trading, 24 hours a day.
It is also very easy to trade here. Anyone can participate in trading in this market because with as low as $5 investment (we do not encourage you to get started) – you can open an account and start trading.
Also, most forex brokers provide different types of charts, news, and analysis for their traders at no additional cost.
We will discuss only the Spot Forex Market in various lectures on our Website.
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