While trading with the foreign exchange market might seem easy at first for the simple reason that you are working with currencies alone, the truth is actually quite different. There are three types of Forex market trading and each of them is unique and difficult in their own way. Below you will learn about these three Forex market trading strategies: a bit of what they are and how they work.

  • Spot Market
  • Forwards Market
  • Futures Market

Spot Market

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A spot market is where currencies are bought and sold according to the current prices listed that day on the Forex market. These current prices are based mainly on supply and demand. Supply and demand is a reflection of economic performance of the country in which the currencies you are invested in are being affected. Is there a housing bubble about to burst? Has the construction sector imploded? In addition to these factors, political situations and unrest can have major implications on the current prices of currencies, as well as current interest rates. Since there are so many ways that the spot market can be affected, it is always changing, which is why checks on investments should be done regularly. This cannot be stressed enough if you choose to enter the spot market. You must become a master of current events; not just financial news, but also political news. That is, if you want to be successful.

Forwards Market

 Forwards market contracts are bought and sold through over the counter (OTC) methods. These contracts are mediated and are an agreement between two parties. Trust is implied in this market and any upstanding Forex market trader will uphold his end of the bargain, so rest easy if you enter the forwards Forex market.

Futures Market

Futures markets are regulated by large financial future associations. In the US, the National Future Association regulates all Forex market trades done in the futures market. Future contracts are bought and sold based on a standard size and a settlement date based on the public commodities market. Both future and forwards markets are generally used by large companies and financial institutions. Spot markets are usually reserved for individual Forex market traders.

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