Different forms of forex trading

As the exchange rate is very low, traders have found many different ways to invest or speculate on currencies.

Of these, the most popular are spot currencies, forward currencies, option currencies and currency trading funds (or ETFs).

Forex trading in several ways

Foreign exchange forward contract

Futures are contracts to buy or sell a specific asset at a specific price at a future date (which is why they are called futures).

Currency futures were created by the Chicago Mercantile Exchange in 1972, when the Bell Bottom and Platform shoes were still elegant.

The futures contract is standardized and traded on a centralized exchange, the market is transparent and well regulated.

This means that pricing and transaction information is readily available.

Currency option

An "option" is a financial instrument that gives the buyer an obligation, but not an obligation, to buy or sell a property at a specific price on the option's expiration date.

If a trader "sells" an option, he will be forced to buy or sell the property at a price specified on the due date.

Like futures, there are options on the stock exchange, such as the Chicago Mercantile Exchange (CME), the International Stock Exchange (ISE) or the Philadelphia Stock Exchange (PHLX).

However, the disadvantage of trading currency options is that market hours are limited to certain options and that liquidity is not as important as futures or spot contracts.

ETF currency

ETFs or ETFs are the world's smallest foreign exchange members.

Currency ETFs provide exposure to a currency or basket of currencies. Below is a list of the most traded funds.

ETFs are created and managed by financial institutions that buy currency and hold it in the fund. They then offer shares of the public fund on the stock exchange, which allows you to buy those shares and trade as shares.

Like currency options, the limitation of ETFs is that the market is not open for 24 hours. Exchange-traded funds are also subject to trading fees and other transaction costs.

Local forex market

In the spot market, currencies are traded immediately or "instantly" using the current market price. The interesting thing about this market is its simplicity, liquidity, restricted spreads and 24/7 operations.

It is very easy to participate in this market, where accounts under $ 50 can be opened! (We don't suggest that) - You will learn why in our capitalization lesson!

In addition, most forex brokers provide free charts, news and analysis.

At Escola de Pipsologia, when it comes to a specific method of currency trading, we will talk mainly about the spot foreign exchange market.