Jun 24, 2020
Introduction to Foreign Exchange Futures
For the futures, the idea is to add time to this equation.
We trade based on the perceived value of a particular currency at some point in the future.
As a currency trader, I do some research and analysis, look at the socio-economic environment and draw charts.
His system was a way to reduce risk and fundamentally stabilize transaction prices between buyers (such as merchants) and producers (such as farmers).
A futures contract is generally a stated time or date of delivery, that is, the price to be paid for the goods.
This contract is valid whether there is a sudden shortage or surplus of sheep.
In theory, at least, it is an unbreakable promise.
Both sides must consider the situation and the future and then make an informed decision.
In today's society, you can see the impact of many future concepts.
That is why even a sudden drop in oil prices today could take weeks to seep through the pumps.
The prices of these products are higher.
In fact, there is not much difference between futures and spot currencies.
Most people prefer to unwind their positions before the settlement date because cash payments are calculated and settled on a daily basis.
Therefore, you can periodically reevaluate your position to determine if you are willing to remain in the contract.
Generally, futures trading is more difficult to enter because of the higher requirements for account balances.
They also trade on an exchange, so trading is restricted to the hours of trading on an exchange.
However, they tend to offer lower spreads and transaction costs.