Forex FX is the market in which currencies are traded. The forex market is the largest, most liquid market in the world, with average traded values that can be trillions of dollars per day. It includes all of the currencies in the world. There is no central marketplace for currency exchange ; trade is conducted over the counter. The forex is the largest market in the world in terms of the total cash value traded, and any person, firm or country may participate in this market.
A spot deal is for immediate delivery, which is defined as two business days for most currency pairs. The major exception is the purchase or sale of U. Canadian dollars, which is settled in one business day. The business day calculation excludes Saturdays, Sundays and legal holidays in either currency of the traded pair. During the Christmas and Easter season, some spot trades can take as long as six days to settle.
Funds are exchanged on the settlement date , not the transaction date. The euro is the most actively traded counter currency , followed by the Japanese yen, British pound and Swiss franc. Market moves are driven by a combination of speculation , especially in the short term ; economic strength and growth; and interest rate differentials. Any forex transaction that settles for a date later than spot is considered a "forward.
The amount of the adjustment is called "forward points. They are not a forecast of how the spot market will trade at a date in the future. A forward is a tailor-made contract: Transactions with maturities longer than a year are relatively unusual, but are possible.
As in a spot transaction, funds are exchanged on the settlement date. A "future" is similar to a forward in that it's for a date longer than spot, and the price has the same basis. Unlike a forward, it's traded on an exchange, and can only be executed for specified amounts and dates. With a futures contract , the buyer pays a portion of the value of the contract up front.
That value is marked-to-market daily, and the buyer either pays or receives money based on the change in value.
Futures are most commonly used by speculators , and the contracts are usually closed out before maturity. Dictionary Term Of The Day. A conflict of interest inherent in any relationship where one party is expected to Broker Reviews Find the best broker for your trading or investing needs See Reviews.
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