If you are interested in starting to trade Forex, you will be excited to learn that there are various investment methods to consider. There are some different ways that traders have thought of, to help you to trade, invest or speculate in different currencies. Some of the most popular methods include forex spot, futures, options, and exchange-traded funds (ETFs).
Spot Market
Currencies are traded immediately in the spot market. They are traded on the spot, making use of the current, up-to-date market price. The advantages of the spot market are its simplicity, liquidity, tight spreads, and round-the-clock operations. It is relatively straightforward to take part in the spot market as you only need {currency}25 to open an account to begin trading. The brokers on the spot market also supply charts and research free of charge.
Futures
Futures can be explained as the contracts which allow you to buy or sell a specified asset. This action can be done at a specified price on a future date. This is where they get the name “futures”. The foreign exchange futures were created by the Chicago Mercantile Exchange (CME) IN 1972. Future contracts, since then, have become standardized and are traded through a centralized exchange system. The futures market is very transparent and well-regulated. Fortunately, due to this fact, the price and transaction information are readily available.
Options
The financial tool which gives the buyer the right or the option is called an “option”. This is not an obligation, but an option to buy or sell at a specified price on the date of expiration of the option. If an option were “sold” by trade, the trader would be obliged to buy or sell an asset at the expiration date for a particular price. Options, like futures, are traded on an exchange market. Some exchange markets are the Chicago Board Options Exchange, the International Securities Exchange, and the Philadelphia Stock Exchange. The disadvantage to options traded in the foreign exchange market is that the for central options the hours are limited. Also, the liquidity if not as ideal for options as with futures or the spot market.
Exchange-traded Funds
The youngest member of the foreign exchange world is exchange-traded funds (ETFs). Exchange-traded funds contain collection stocks which are combined with some currencies. This allows the trader to expand and diversify with different types of assets. Financial institutions create these ETFs. They can be traded like stocks on an exchange. The limitations of exchange-traded funds are that the market is not open 24 hours. This is similar to foreign exchange options. Furthermore, since ETFs contain stocks, they are subject to transaction costs and trading commissions.
Risk Warning: Users should be aware that all investment markets carry inherent risks, and past performance does not assure future results. Trading of any kind is a high-risk activity, and you could lose more than you initially deposited. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 73-89% of retail investor accounts lose money when trading CFDs. Please be sure you thoroughly understand the risks involved and do not invest money you cannot afford to lose. Your capital is at risk. Advertiser Disclosure: TopBrokers.Trade is an independent professional comparison site funded by referral fees. The compensation TopBrokers.Trade receives is derived from the companies and advertisements featured on the site. Due to this compensation, we can provide our users with a free comparison tool. Unfortunately we are unable to list every broker or exchange available, however, we do our best to review as many as possible.
