Transcript of "Currency Basics Forex Market Terms"
Welcome to the World of Currencies<br />
Lets understand, how foreign exchange market really works…<br />
Spot<br />Three ways of trading in Forex<br />Spot<br />Forward<br />Future<br /><ul><li>Foreign exchange spot trading is buying one currency with a different currency for immediate delivery. The standard settlement convention for Foreign Exchange Spot trades is T+2 days, i.e., two business days from the date of trade execution.
An exception is the USD/CAD (US – Canadian Dollars) currency pair which settles T+1. Rates for days other than spot are always calculated with reference to spot rate</li></li></ul><li>Three ways of trading in Forex<br />Spot<br />Forward<br />Future<br /><ul><li>A foreign exchange forward is a contract between two counter parties to exchange one currency for another on any date after spot
Settlement Day –</li></ul>TD<br />TD+1 <br />TD+2<br />TD+3 or any later day<br />For example, if April 5 is the TD. Then April 6 is tom and April 7 is spot. Any day after April 8 is forward. Also note that Saturday and Sunday or market holidays will not be considered<br />
Three ways of trading in Forex<br />Spot<br />Forward<br />Future<br /><ul><li>To participate in the currency markets one needs to go through an Authorized Dealer. Most of the trading is done Over The Counter
To encourage retail participation and to do away with some of the disadvantages of the forward markets the exchanges have introduces Currency Futures</li></li></ul><li>What are currency futures?<br />A futures contract is an agreement between two parties to buy or sell an asset at a certain time in the future at a certain price. Futures contracts are special types of forward contracts in the sense that they are standardized exchange traded contracts<br />
The difference between currency forwards and exchange traded futures<br />