Thursday, February 12, 2009

3 ways trading with forex for private investor

Today we are going to learn about the various ways you can trade in Forex. You have various options you can use as your path to trade in Forex. You can do it directly and inderecty. It is really depend on your preferences. To simplify the concept, this is the kind of Forex transaction. This article simply explains about “what are the transactions you can use to trade in Forex”. Why you need to understand these three ways? It is because the understanding of these three concepts will boost your performance in the Forex business.

Let us begin with the first one. It is called “The Spot Transaction”. “The spot transaction” is a direct exchange among one against another currencies. In this transaction, there are some terms you need to understand. The first term is spot rate. Spot rate also called benchmark rate. Spot rate or benchmark rate is the market price for the particular currencies at a point of transaction. In the international world, you do not need any settlement if you involves as the investor in this trading. It does not require any immediate payment on the spot of this transaction. You might ask this question “so, when is the settlement date?” Let me answer. The day when you make your transaction is called the deal date. Professional also called the deal date as the trade date. The next day, which is the second day is called the settlement date. Settlement date also called value date.
The second one is “Forward and Futures”. “The forward transaction” is the trading agreement which arrange the trading process which not included in the Spot Transaction. It is not included in the spot transaction because the “real” deal date is more than two days after the deal date. The real deal date is the day when the two traders point a price. So the trader is not actually pay other trader at the current deal day based on that day price but they make agreement to refer at a day after the deal day when the particular agreement is made. “Futures” is a contract at a day in the future based on a fix price and amount.

The last one is “Options”. “The options” is nearly the same as Futures contract. Therefore, the buyer of the particular options only has the right to buy the currency at the fixed amount and the fixed price at the agreed future day.

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