forex trading strategies
that work the way you expect
|
terms of the trade
Fixing
|
Forex fixing is the daily monetary exchange rate fixed by the national bank of each country. The idea is that central bank use the fixing time and exchange rate to evaluate behavior
of their currency. Fixing exchange rates reflects the real value of equilibrium in the forex market. Banks, dealers and online foreign exchange traders use fixing rates as a trend indicator.
|
Forward
|
A transaction that occurs on a prearranged date that is set in the future. The forex tranaction thus occurs on that date regardless of what the exchange rate may be on that said day.
|
Future
|
Foreign currency futures are exchange traded forward transactions with standard contract sizes and maturity dates. Futures are standardized and are usually traded on an exchange
created for this purpose. The average contract length is roughly 3 months. Futures contracts are usually inclusive of any interest amounts.
|
Option
|
An option (referred to as an FX option when dealing with the forex market) is a derivative where the owner has the right but not the obligation to exchange money denominated in one
currency into another currency at a pre-agreed exchange rate on a specified date.
|
Spot
|
A spot transaction is a two-day delivery transaction (except in the case of trades between the US Dollar, Canadian Dollar, Turkish Lira, EURO and Russian Ruble, which settle the next business day),
as opposed to the futures contracts, which are usually three months. This trade represents a “direct exchange” between two currencies, has the shortest time frame, involves cash rather than a contract;
and interest is not included in the agreed-upon transaction.
|
Swap
|
The most common type of forward transaction is the currency swap. In a swap, two parties exchange currencies for a certain length of time and agree to reverse the transaction at a later date.
These are not standardized contracts and are not traded through an exchange.
|
|