By Cedric Welsch
The huge market which allows buying, selling, exchange, and speculating in different countries of the world is the foreign exchange market. The participants in this exchange include retail forex brokers, forex investors, central banks, hedge funds central banks, commercial companies, investment management firms, and banks. It is the largest financial market in the world. Forex news generates from these large and liquid markets. They are not a single exchange but a world-wide network of computers. These computers handle all of the functions and requests of participants from all over the world. One component of this very large market is forex futures.
Forex trading news covers the activities taking place in this sector which operates in the same basic manner as traditional counter part. The basis is the purchasing of a contract to buy or sell a certain volume of an asset at a specific price on a previously specified date. The difference in these types of futures is that forex market is traded through several different exchanges instead of a centralized exchange. All of these currency futures quotes are against the U. S. dollar. This is different than the spot forex market.
There are two ways to participate in this branch of the investment strategies. They are Hedging and Speculating. Hedgers use these derivatives to reduce or totally avoid risks by protecting themselves against various price movements. Speculators are looking to earn a profit so they invite the risk. One reason to use the hedge strategy is to neutralize effect of changes in currency values on sales revenue. Hedging requires the use of forwards and futures. Forwards offers the trader more flexibility in tailoring investments to their needs. With futures a set contract size must be used.
The income from a forward is not due until a contract expires. The cash backing a future is calculated daily and buyer along with seller must settle daily. Futures allows the investor in the foreign exchange to re-evaluate their position as frequently as necessary to achieve their goals. Speculating offers a greater opportunity for profit. The trading in the futures market advantages offer advantages of lower spreads, transaction costs, and more leverage. The disadvantages are requires more capital per purchase, being limited to the exchanges hours of operation, possible National Futures Associations fees. On the foreign exchange there are advantages and disadvantages in hedging and speculating. The chosen method depends on an investors financial goals.
About the Author
It can be inconsiderably confusing at times listening to various currency news trading all at once. There can be a huge magnitude of forex broker review sources you can read, but pick the reputable one.
