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Trading Currencies

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  • Trading Currencies

    So, now you understand what the forex market is and how to read a quote, which is great. Now comes the time to learn how to put that info to use. Though you may feel a little intimidated trading currencies at first, you'll see how easy it can be after a few orders have been placed.

    One unique aspect of this huge international market is that there is no central marketplace for foreign exchange. The majority of regular stocks trade on defined markets like the New York Stock Exchange. Currency trading, on the other hand, is conducted electronically over-the-counter (OTC), meaning all transactions around the world occur via computer networks between traders, rather than on one centralized exchange. The market is open five and a half days a week, 24 hours a day.

    Spot Market and the Forwards and Futures Markets
    There are actually three ways that institutions, corporations and individuals trade forex: the spot market, the forwards market and the futures market. Don't worry, it isn't as complicated as you might think. Let's start with the spot market, which always has been the largest forex market because it is what the other two (forwards and futures) markets are based on. In fact, when people refer to the forex market, they are usually actually talking about the spot market.

    The Spot Market
    The spot market is simply where currencies are bought and sold, according to the current price. That price determined by supply and demand, and is a reflection of many things, such as:

    Current interest rates offered on loans
    Economic performance of countries
    Ongoing political situations (both internationally and locally)
    The perception of the future performance of one currency compared to another

    A completed deal is known as a "spot deal." It is a bilateral transaction by which one party sells some specified amount of currency and receives a specified amount of another currency in cash. Although the spot market is thought of as transactions in the present, these trades actually take two days for settlement. For example, Bob buys 3,000 U.S. dollars with 4,000 Australian dollars.

    The Forwards and Futures Markets
    Unlike the spot market, the forwards and futures do what their names suggest, for delivery in the future. Also unlike the spot market, instead of buying the currency at today's price and getting it now, these contracts allow you to lock in a currency type, price per unit and a date in the future for settlement.

    In the forwards market, contracts are bought and sold over the counter between two parties who have determined the terms of the agreement between themselves.

    In the futures market, futures contracts are bought and sold on an exchange, such as the Chicago Mercantile Exchange, and are based upon a standard size and delivery date. The National Futures Association regulates the futures market in the U.S. The contracts have specific details, including the number of units, settlement and delivery dates, and minimum price increments that cannot be customized. Both types of contracts are binding and, upon expiry, are typically settled for cash, although contracts can also be bought and sold before they expire. The exchange acts as a counterpart to the trader, providing clearance and settlement.

    For example, let's say "CompanyUSA," based in the U.S., agreed sell a machine for 200 million euros. It will take one year to build the machine and deliver it. CompanyUSA will receive 200 million euros, but if the euro losses value against the USD during that time, when converted they will not be worth as much. These markets could be used in order to hedge against future exchange rate fluctuations.

    - If received today, 200 million euros at 1.6393 USD/EUR = $122 million

    - Risk of euro losing value: 200 million euros at 1.7391 USD/EUR = $115 million

    CompanyUSA could enter into a futures contract to deliver 200 million euros at an acceptable exchange (1.6529 USD/EUR), thus, the company is guaranteed 121 million, and could hedge against the risk of receiving substantially less. (For a more in-depth introduction to futures,

    This is a basic example of a futures contract, and more in depth explanations will come later. Investors usually want to know more about what to look for to make trading decisions. Next up is a look at charting patterns that could point you in the right direction.

  • #2
    It’s important for us to understand things properly first up, as it makes no sense at all for anyone to go ahead in trading without proper understanding of it. This is why I focus on learning well, as only then we are going to have best chance of earning and that’s exactly what I have with OctaFX, as they are too good for all reasons. As they have epic offering from having small spreads 0.1 pips to high leverage up to 1.500 while there is also rebate scheme which makes it all good for me!


    • #3
      Thank you very much for your useful thread! Whatever, I have more than five years trading experience, so now I can handle a long list of trading pairs! Yeah, I started my trading journey with only Forex currencies, but now I also active on CFDs, Stocks, Shares and Metals! Basically, I get all of popular even exotic trading pairs in my live chart from ECN broker trade24.


      • #4
        Trading currencies is a work of expert individuals. In the event that you need to profit here, you must be gifted. You have study and research a considerable measure. If you think profiting is simple without learning, don't come here. Make an attitude of learning. I am trading with FXPM that gives low spreads as low as 0.01 and moment execution.


        • #5
          Before doing anything it is very important to understand the things clearly. Before doing forex it is necessary to understand market clearly. Forex market is high volatile market. To understand it better I am using technical support of my broker TradesFX. They are providing me live market streaming. Their charts, quotes and most recent market news helps me to take decision according to the market condition. They also have 2 USD commission per referral.


          • #6
            To do currency trading, first you have to give time for learning. It's a professional work that requires specific knowledge and skills. Once you have necessary skilled, you can do it just by spending one or two hours per day. But for learning you have to put your efforts and dedication. One more thing learning doesn't happen in one or two months. You have to spend good amount of time depending on your level of understanding and other factors. I'm trading MaximusFx. It is a good forex broker. It's trading platform is marvelous. There's no requote or postponement in trade execution. It's withdrawal procedure is additionally moment.
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