Which Way is the Right Way to Trade Forex?
You’ll most likely be trading forex on the Spot Market. The Spot Market is “on the spot” trading. The spreads are tight and the cost of entry is low. It is a 24-hour market that is liquid and simple.
The other ways you should be familiar with are:
Swaps are exchanging currencies, then reversing that exchange on a predetermined future date. This is the most common forex transaction. It is not standardized, nor is it traded on an exchange, meaning that the two parties make their own deals. Banks are the ones who participate in swaps the most.
Futures are contracts to buy or sell at a certain price at a future date. They are well regulated on an organized market and are traded on an exchange.
ETFs are exchange traded funds. As the name implies, they are traded on an exchange. They trade very similar to stocks.
Options are also traded on an exchange. The buyer of the option pays a premium for the option to buy or sell the instrument. The seller of the option is obligated to sell or buy the instrument to/from the buyer of the option. The seller of the option collects a premium for this. There is less liquidity on options.