October 21, 2013
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Methods Of Trading Forex Live

forex live

This article covers the different methods of forex live trading.

Over the years forex traders have discovered a variety of different methods in which to trade on the forex market. While there are many, there are four which stand out as the most popular and most effective. These four are identified as the spot market, options, futures and exchange-traded funds or ETFs. To use these strategies optimally one must have a strong understanding of knowing what they are and how they work.

Spot

The spot market can be used to trade forex as it refers to all transactions which take place on the forex live market. However, it should be noted that it deals with currencies traded ‘on the spot’ using the current trading price at the given trading time. This market has been identified as one of the most popular due to its simplicity, 24 hour operation, liquidity and tight spreads. Furthermore, it has opened the opportunities of the market to individual traders through online trading platforms which require limited funds. Naturally it does have a degree of risk due to fluctuating currency exchange rates which can cause swings against a trader at any time.

Options

The options financial tool providers a buyer with the option to either buy or sell a particular currency asset. The option will present the price at which the buyer will wish to sell. Unlike the spot market, the options sale takes place on the expiration date of the transaction without any obligation from the buyer to trade. However, if the trader has sold an option they are obliged to either buy or sell the currency asset at a noted price on the date of transaction expiration.

While this method is more stable than a spot market, there are many disadvantages which must be considered. One includes a lack of liquidity; another is the limitation of trading hours.

Futures

Futures trading is a form of trading which looks at transactions in the future. The futures trading contract details a particular price for a certain currency sale or purchase on a noted date. This type of exchange was developed by the Chicago Mercantile Exchange in 1972 in order to regulate trading. One benefit of the futures market is that it is very well-regulated due to the standardised nature of the contract. Furthermore all trading must go through a central exchange to ensure this regulated and lawful trading, as well as the easy accessibility of price and trading information.

Forex Live ETFs

The exchange-traded funds or ETFs are the most recently developed method through which to trade forex. The ETFs contain a particular number of stocks which include specific currencies. By utilising this the trader expands their portfolios showing the usage of both stocks and forex assets.

These funds were created by economic institutions in order to be traded through central exchanges. However, there are more disadvantages than advantages to this method. Firstly, this market has limited operating hours similar to options trading. Another pitfall is that the ETFs are liable to transaction costs and trading commissions due to the stocks aspect.

These are the main methods of trading forex live and you should know exactly how it works.  Your method of trading will determine the methods you make use of, but chances are that you will more than any other method, trade in the spot market.

 

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