What is the spot market?
The spot market is a market where investors can buy & sell currencies at
their current price. The hope is that the currency will go up in value &
therefore make the trader a profit. The price of the currency being
traded is dictated to by supply & demand, anything can affect this price
just like in the stock market, sentiment, political endeavors or natural
disasters & many more things that are too many to list here.
Getting a good forex education will
help you to differentiate between these possibilities so you can trade
with confidence.
Once a price has been agreed on for a currency & the
exchange take place between another currency then this is known as a
spot deal. Once the position is closed then the two parties will settle
in cash.
What are the futures markets?
The futures market deals with contracts on a certain
currency type. This would involve making a contract to buy or sell a
certain currency at a set price at a future date.
Futures contracts will be bough & sold depending on a
size & settlement date on commodities markets.
This is regulated by the National futures association in the US.
These contracts have varying details like dates of settlement & number
of units sold etc etc.
Both forwards & futures markets contracts are binding
& are nearly always settled for cash. Corporations will use forwards &
futures markets to hedge against fluctuations of the exchange rate in
the future.
Always ensure you know the futures market inside out before you start to
trade. Generally most novice traders will just stick to the Spot market.
Also beware that trading futures is a risky business & you should not
believe everything you hear when it comes to making fortunes on the
Forex.
Do your own homework on Forex trading strategies
first before taking a risk on the forex market; you’ll be glad you did.
Remember that the average beginner trading the Forex will lose around
$15k, most give up after this so make sure you’re not one of them.
