Currency trading is very exciting and has lots of advantages. In the forex market, currencies are always traded in pairs. Currency pairs includes of two currencies, a base currency, and the quote currency (counter currency), for e.g. in a Euro/US Dollar currency pair, the Euro is the base currency and US Dollar is the quote currency.
Spot Markets of Currency Trading
In these forex markets, Currency trading is on the spot based on the current price. The uniqueness of this market is its volatility, liquidity, tight spreads, and whole day operation. It is very convenient to participate in the forex market since accounts can be opened with little investment. Apart from that, many brokers provide trading charts, analysis and news for free.
Currency futures are contracts to buy/sell asset at a specified price on a future date. Futures were created by the CME (Chicago Mercantile Exchange) in 1972. The contracts are customized and trading is done through a centralized exchange, the forex market is transparent and is well regulated. That means the price and transaction information are already available.
It is a financial instrument that gives a buyer the option, not an obligation, to buy or sell an asset at a specified price on the options expiration date. If an option is sold then the trader will be obliged to trade an asset at a specified price at the end of the date. Like the futures, options are also traded on forex. However, the disadvantage in trading options is that trade timings are restricted for certain options and not so good liquidity like futures or spots.
They are the newest members of the forex world. An ETF contain a set of stocks along with some currencies, allowing traders to diversify with several assets. They are created by financial institutions and are traded like stocks. Like options, trading ETFs is limited to the fact that the market is not working throughout the day. Also, since they contain stocks, they are subject to commissions and transaction costs.
Currency spread betting is like trading spot market. Currency pairs are traded on the price movement and provide the same profit/loss as in the spot market. Spread betting allows you to trade without any inconvenience, price and restrictions associated with physical proprietorship. Spread betting is free of commissions, any service charges, and taxes. The only transaction cost, which is payable is the spread between the buy and sell price of the currency pair.
Trading in binary options is an excellent type of trading. They are very simple to understand and provide traders and investors a powerful device for reducing risk. They are binary trade and are displayed as an index between the range of 0 and 100. If a speculation is correct then the trade is settled at 100, and if it is wrong then the trade will end at 0. There are several binary options available for trading. Trading is commission free. The only transaction cost is the spread.
Foreign exchange market is a very huge market and provides various types of platforms for Currency trading. You can trade, speculate and invest in currencies through various methods. Because forex is so exciting, traders came up with a number of ways to hedge or speculate in currencies.