As the name suggests, forex or the Foreign Exchange Market is a global market for trading different currencies. Everyone would have at least once heard “the value of dollars dropped” or maybe “the value of dollars keeps fluctuating,” It is this currency store that determines the relative value or foreign exchange rate of every currency. It trades in huge volumes and is considered the largest market.
How is trading done at Forex?
Usually, financial and investment banks are the ones who are part of forex trading, but there are also opportunities for investment at professional and individual levels. The market works are three levels, spot marketing, future marketing, and forward marketing.
- Spot Marketing: It is considered to be one of the largest assets of forex trading. As the technologies have been developed over the years, spot marketing has taken over future and forward marketing. Spot marketing, also known as liquid or cash markets, is a major source of exchanging cash or making instant transactions for different commodities or deliveries at the currency’s most recent values. Even though spot marketing means an instant transaction, it may take two-three days for legal transfer and final settlement.
- Future Marketing: Unlike spot marketing that talks about the instant transaction at the current rate or value, future marketing is buying and selling commodities at the specified date in the coming future. Though the trading of goods will happen in the coming future, the rates will be when the deal was sealed between the parties.
- Forward Marketing: It is highly customizable marketing. The terms and conditions are entirely dependent on the parties making the deal. Forward Marketing is the type of marketing that provides financial instruments and contract the delivery at the decided date and time and the decided price in the coming future.
Though spot marketing is considered one of the largest assets, future and forward marketing plays a major role at the Corporation level. Huge corporations intend to take transact through forward and future marketing schemes as it helps them, eliminating the risk of fluctuations of future exchange rates.
Advantages of Foreign Exchange
- Forex is a global and large market that is easily accessible turns out to be a good option for many companies. It doesn’t require much big of an investment and still turns out to be profitable.
- Apart from being easily accessible, Forex can be used anytime, any hour of the day.
- Due to technological advancements, it becomes difficult for other traditional methods to catch up with everything. Forex is a relatively newer method of trading that is good with adopting new technologies.