Because foreign exchange is so fascinating, traders have come up with different ways to invest or speculate in currencies. Among them, the most popular are spot, futures, options and exchange-traded funds (or ETFs for short).
Different ways of foreign exchange transactions-Yuhui International
Spot market
Spot market In this market, spot transactions are traded in an instant or “spot” manner using current market prices. Foreign exchange spot transactions are the foreign exchange retail transaction model we are engaged in.
In the spot market, currency transactions are traded instantly at current market prices. The charm of the spot market lies in its simplicity, liquidity, low spreads and 24/7 trading. Since the minimum amount for opening an account in the spot market is only $ 100, it is very easy to participate in the spot market transaction. But this is not the reason why we recommend that you enter the market with a principal of 100 US dollars. The specific reason you will learn in our capital clearing related courses. In addition, most brokers usually provide graphics, news and research reports for free.
Futures are contracts that buy or sell an asset at a certain price at a certain time, which is why we call it futures. Foreign exchange futures were pioneered by the Chicago Mercantile Futures Exchange (CME). Given that futures contracts are standardized and conducted in a centralized manner, the futures market is very transparent and strictly regulated. This means that both price and transaction information can be easily obtained.
An option is also a financial instrument that gives the buyer the power to buy or sell an asset at a specific price on the option expiration date, rather than an obligation. If a trader sells an option, then he or she will have to buy or sell an asset on the option expiration date.
Like futures, options are traded on the floor, such as the Chicago Board Options Exchange, the International Stock Exchange, or the Philadelphia Stock Exchange. However, the disadvantage of foreign exchange option trading is that for some options, the market trading time is limited, and the liquidity is not as good as the futures or spot market.
Exchange Traded Fund
Exchange-traded funds (or ETFs) are the youngest members of the foreign exchange market.
ETFs may contain a range of securities and certain currencies, which helps traders diversify their assets. ETFs are established by financial institutions and can be freely traded like securities. Like foreign exchange options, the limitation of ETF trading is that it cannot be bought and sold 24 hours a day. At the same time, because ETFs contain securities, ETF transactions also include transaction commissions and other transaction fees.