Because of high popularity of the foreign exchange market, traders find different ways to speculate or invest in currencies. Among them some of the most popular ways of trading forex include- forex spot, options, futures and ETFs or exchange-traded funds.
1. In terms of the spot market, currencies are traded on the spot by using the current market price. The reason behind the popularity of this market is its simplicity, round the clock operations, tight spreads and liquidity. One can open his/her account with as little an amount as 25 dollars, this is another reason that beginners opt for trading in this market.
2. FX futures refer to the contracts of buying and selling a certain asset at a predetermined price on a future date. The futures contracts are well regulated and transparent, as they are standardised and traded through a centralised exchange. The price and transaction information are always available in the futures contracts.
3. With the help of the option (a financial instrument), the buyers get the right or option (but not the obligation) to purchase or sell an asset at a specified price on or before the option expiration date. Like the futures, options are also traded on an exchange. However, there is a disadvantage of trading forex options trading is that the market hours is limited for certain options, and also the liquidity of the options are not as volatile as the spot market or futures.
4. ETFs or exchange traded funds are the latest addition in the world of forex. The ETFs are created by financial institutions and the traders can trade it like stocks through an exchange. The disadvantage of ETF is it does not have a round the clock market, it means that the market is not open for 24 hours. Also as ETFs includes stocks, they are subject to trading commissions and other transaction costs.
If you are trying to become a professional forex trader, then you can trade in any of the above ways to gain profit. Best of luck for your next trade!
1. In terms of the spot market, currencies are traded on the spot by using the current market price. The reason behind the popularity of this market is its simplicity, round the clock operations, tight spreads and liquidity. One can open his/her account with as little an amount as 25 dollars, this is another reason that beginners opt for trading in this market.
2. FX futures refer to the contracts of buying and selling a certain asset at a predetermined price on a future date. The futures contracts are well regulated and transparent, as they are standardised and traded through a centralised exchange. The price and transaction information are always available in the futures contracts.
3. With the help of the option (a financial instrument), the buyers get the right or option (but not the obligation) to purchase or sell an asset at a specified price on or before the option expiration date. Like the futures, options are also traded on an exchange. However, there is a disadvantage of trading forex options trading is that the market hours is limited for certain options, and also the liquidity of the options are not as volatile as the spot market or futures.
4. ETFs or exchange traded funds are the latest addition in the world of forex. The ETFs are created by financial institutions and the traders can trade it like stocks through an exchange. The disadvantage of ETF is it does not have a round the clock market, it means that the market is not open for 24 hours. Also as ETFs includes stocks, they are subject to trading commissions and other transaction costs.
If you are trying to become a professional forex trader, then you can trade in any of the above ways to gain profit. Best of luck for your next trade!