Currency trading: What should you know about it? The Indian forex market is a vast market with various diverse features, pitfalls and advantages. Trading in currency futures and engaging in the spot forex market are features of forex investors. There is a very subtle difference between these two investment options. It is worthwhile to find out the difference.
“A currency futures contract is a legally binding contract that obligates the two parties involved to trade a particular amount of a currency pair at a predetermined price (the stated exchange rate) at some point in the future” – according to Investopedia.
On the predetermined date, the buyer can own the currency at the rate decided in the contract unless the seller prematurely closes the position. The buyer may resort to "gamble" before the settlement date to check the price of the currency in order to get it at a cheaper rate.
With the spot Forex transaction, there is a physical exchange of the underlying currencies on the settlement date. The most common in commodities markets is that it involves the actual exchange of the underlying asset. An example of forex spot market participation is the case when an individual walks into a bank to exchange currencies.
Currency futures in the currency market is involved in determining a trading price for a specific date and spot FX is to do with the physical exchange of the currency pair.
Forex brokers actively help all customers to deal with currency trading which is a huge market where all currencies of the world are exchanged with each other on a daily basis. Customers can take help of online forex trading for currency trading. Some offer zero brokerage forex trading account that is beneficial to the customers.
Related to other markets, currencies have a tendency to be very volatile. So currency trading is a risky business. Using conservative risk management is the key to success in currency trading. The bottom line for success is to use a trading plan and be very cautious.
Financial institutions, individual retail investors and corporations are active participants in currency trading. While the banks and retail investors engage in currency trading for profit, the corporations carry on currency trading as a part of their day to day operations for an international business. Related Searches: