If you have spent any time at a race track, you know that you have several different betting options. The same applies with lottery tickets. The various styles, combinations and choices make these recreational activities a little more enjoyable. You can also say the same thing about Forex trading. That’s because a trader has a number of different ways to trade on the market. Each has different rewards and risks and for many it’s much the same challenge as betting on horses or picking winning numbers on the lottery.
Here’s a look at some of the most popular ‘trades’ that are available to choose from:
This is a throwback to the hippie days of the 1970s. The Chicago Mercantile Exchange (CME) can be credited (or blamed) for creating this trading option. You can thank them if it helps you succeed as a trader or hate them if it messes up your overall trading career. What futures are is basically contracts to either buy or sell an asset (specified in the contract) on a chosen date in the future.
You know what it is like to have an option to choose one thing over another, right? Well, this is much like that. A currency option provides the trader with the option to buy or sell an asset at a specified price when that option reaches an expiration date. Remember, it’s an option and not an obligation or order or demand or requirement. Options are traded on exchanges but hours of operation present limitations on this type of trade.
The words exchange-traded funds are the ETF in this instance. What this means is that a trader gains access to a single currency or a bundle of them with an ETF. You can essentially buy or sell shares in ETFs much the same way as you would with stocks. There are limitations to ETF trades. For example, you can’t do it 24 hours a day as the ETF market is not open around the clock. Plus, commissions and fees apply to each ETF transaction.
Spot Forex Market
This is an interesting trade option. Currencies are traded ‘on the spot’ or in other words, right away with current market prices as the guide. This type of trade is quite exciting to participate in as it provides much the same adrenalin rush as betting on horses.
We’ll take a much closer look at each of these types of trades in future articles but want to remind you that there are many, many different ways to participate in Forex trading. It’s a multi-leveled operation where you can just dip your toes into the pool to see how it works or you can just jump right into the deep end after you’ve learned how to swim through the currents and tides. There is no doubt that Forex trading is exciting and rewarding. If you take the time to learn all you can about it, you will be a much better trader.