Day Trading Basics – 4 Types of Forex Trading Systems!

Although the forex market is not exactly what we would call a beginner-friendly business, many people want to learn the basics of day trading Forex so that they can see for themselves if this earning opportunity is right for them.

And the first lesson in the basics of day trading in Forex is to know the different types of trading systems in this industry.

The basics of day trading. Lesson 1: Spot Currency Trading

Spot currency trading means exactly what the name suggests: trading currency on the spot. This occurs when one investor arranges with another investor to trade a currency during trading hours. These investors should be able to complete their transaction within 48 hours, given the volatility of currency exchange rates.

The only exception to this rule is the Canadian dollar, in which case the transaction must be completed within a day.

The basics of day trading. Lesson 2: Forward Currency Trading

Forward currency trading is the perfect setup for investors who want to take the speculative game a little further by investing in currencies now and reaping the benefits later.]

For the purpose of learning the basics of day trading, note that the currencies traded in such a system depend on the value of the currencies at the time they change hands. If they depend on the value of the currency at the time of the transaction, then it will not be a forward trading setup, rather it falls under the system that we will discuss next.

The basics of day trading. Lesson 3: Trading the currency of the future

Trading currency futures is somewhat similar to trading currency forwards. The only difference? While in a forward currency trade, the parties must exchange currencies based on their value at the time the trade is completed, in a forward currency trade, the trade will depend on the value of the currencies at the time the agreement is entered into.

The basics of day trading. Lesson 4: Trading Currency Options

In currency options trading, the buyer buys an “option” to trade a certain currency at a certain price during a certain period that he will name. The seller will be required to supply a specific currency according to the terms provided by the buyer.

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