Thursday, October 7, 2010

Forex Futures Trading

forex futures tradingWhen most of us think of the Forex market, you really are thinking about cash transactions, but really no other way and called for currency futures. There are some differences between the two, and the advantages and disadvantages of each method.

With foreign exchange spot transactions are actually buying the currency at the time of surgery. Currency futures are agreements in the form of a contract to purchase foreign currency at a specified date in the future. So with that futures trading does not actually own anything at the time of the operation.

A great advantage of detecting the carry trade is that currencies can be traded twenty-four hours a day at the market opening. It is a huge market with over a billion dollars in foreign hands ever-changing day. The currency futures trading takes place in the established exchanges such as Chicago Mercantile Exchange. Negotiation can only be done during the hours of trading on the bag and there are far fewer business opportunities that exist in the open market.

Another disadvantage of futures trading is that you have to pay a commission, while cash transactions you just pay the spread, or difference between the purchase and sale price.

There can be some advantages to trading currency futures as well. It can be used to cover possible currency fluctuations. For example, exporters are paid in foreign currency may want to ensure a particular currency rates to protect against potential negative impacts due to fluctuations in foreign currency.

Another potential advantage for trade in currency futures is that operations are governed by an exchange contract terms are established and used. This could give more protection and help simplify transactions.

It is also possible to use leverage to a greater effect on trade currency futures. You may be able to make big profits, but also take into account that also can stand to see big losses.

Forex futures trading is another form of investment opportunities that may work well in certain situations for all investors. Be sure to do your research and weigh all the pros and cons before entering this field of investment.