Welcome to ForexCommodities.com! “Forex” stands for foreign exchange, and normally refers to the buying and selling of world currencies. Whether the person is into options trading or day trading, many of the forex transactions are handled via the internet. While there is quite a bit of forex trading done all over the world, the epicenter of forex trading is in London due to its geographical proximity to New York, Tokyo, Japan and Sydney, Australia.
Most of the trading in forex is from speculating for a profit, and the most traded currency pairs – The Majors – include the Japanese Yen, Euro, Canadian Dollar, Australian Dollar, British Pound, Swiss Franc, and (of course) the US Dollar. Forex is the most traded market in the world with an average of over US$3 trillion in transactions daily.
What’s the difference between forex and currency futures?
Good question! One difference between forex and currency futures is when the price of the trade is decided and when the physical exchange of the currencies takes place. With forex, the price is decided at the point of the trade and the physical exchange happens at the same time (or shortly after). With currency futures the price is decided when the contract is signed and the currencies are exchanged on the delivery date – normally sometime in the distant future. The biggest difference between forex and currency futures, however, is that currency futures are traded on the Chicago Mercantile Exchange and the Intercontinental Exchange – both of which are regulated, which is an extremely important aspect when trading.
Forex trading has come a long way from the gold standard and the Bretton Woods system. The three main exchange rate systems include Managed Floating Rates, Dollarization, and Pegged Rates. Managed Floating Rates are a type of system created when a currency’s rate of exchange is subject to fluctuations in value due to supply and demand. Dollarization is simply when one country decides to adopt the currency of another thus creating stability as an investment; however, the bank of the adopting country can no longer make banking policy. Pegged Rates are a type of system used by some countries to “peg” their currency exchange rate to a foreign currency to hopefully create more stability in their currency as compared to a normal float. Understanding information like the history of forex trading, the exchange systems in place, and the 6 Reasons for a Dollar Bull Run will help any trader – new or experienced, day-trader or options strategist.
