Once you have decided on the currency you want to trade, you also need to decide on how you want to trade currency. There are three different types of Forex markets:
- Spot forex market: This is the physical exchange of currency pairs that happens ‘on the spot’ or within a short span of time.
- Forward forex market: In this, a customizable and private agreement is set up with details about the currency to be traded, the set price, and the range of future dates when the exchange is expected to take place
- Future forex market: In this, a standardized agreement is set up with the same details as that of forward forex. The main difference is that the future forex is traded through central marketing with a legally binding contract, whereas the forward forex is traded through over the counter contracts (just private agreements between theo parties trading)
Most traders do not plan on taking the delivery of the currency. Instead, they focus on making exchange rate predictions between different currency pairs to take advantage of the price movements
Want to know more about how to trade Forex? Check out our detailed guide.