Spot Forex market

Today, undoubtedly the largest market in the worldwide spot is the Forex market, which in fact is the largest, compared to any other financial market. In this market the simultaneous exchange of the currency of a country is produced by another currency, such as the euros for dollars, the dollars for yen, the dollars per pound, etc. The way this market operates is by trading with the currency pairs like the EUR / USD is formed by a base currency and a currency counterparty or trading.

After the EUR / USD, another pair of fairly common currency in the Forex market is the GBP / USD (Great Britain pound against the United States dollar). In this case, if the GBP (Great Britain pound) is increasing its price against the USD (United States dollar) strengthens, and then the investor buys hoping that the price will continue to rise. Conversely, if the GBP (Great Britain pound) weakened against the USD (United States dollar) or in other words the USD (United States dollar) strengthened against the GBP (Great Britain pound) then the investor sells. The biggest benefit in the Forex market is its high level of liquidity that allows the investors to enter and exit the market at will.

The Spot Forex market

With regard to the Forex, the Spot market can be defined as one of the main means that are currently used for the currency trading worldwide. In the currency market, the various brokers who transact buy / sell to the customers listed a rate of purchase and one sale, the first being the price at which the broker is willing to buy the foreign currency and the second the price which it is willing to sell. In this financial market, the difference between the rate buying and the selling rate is called margin or spread, and constitutes much of the profits of the broker.

In the Spot market the currency transactions are immediate to delivery (but no physical delivery of money), and even though they are operations that are effective immediately, are settled two business days after the agreement of the parties that made the negotiation. The Spot market in most of the foreign exchange transactions, both large investors (banks, companies, financial institutions) and among the younger investors who are mainly individuals with relatively small capital compared to the older investors are made.

In the spot market, the prices can be affected by the current supply and demand, which tends to make the prices more volatile.

In the spot market it must take into account whether or not the product is perishable. A non perishable commodity like the gold or the silver is sold at a price that accurately reflects the future price movements. By contrast, a perishable commodity like grain or fruit is directly affected by the supply and the demand.

The speculation on the spot market

The Spot Forex market2Speculation is opening the positions in the market to obtain the gains from the changes in the asset prices that is trading. In the case of the Forex, the speculator buys a particular currency (the long position) if you think the price is going up against another and sells a currency (the short position) if you think the price is going down with respect to another (remember that the currencies are traded in pairs). Apart from the spot currency market, the market for Options and Futures also provides for the investors some good opportunities to make the profits through the speculation.

Currently, the speculation is the main activity of most of the agents engaged in the currency trading. Mostly speculative transactions are carried out by the agents of the bank and non bank foreign exchange as a secondary activity to generate the profits.

If we compare the speculation arbitration, the first involves both the risk and the need to immobilize the capital invested. Here it is what is purchased at one time and sell in another, after there has been a change in the price of the currency. It can be said that the speculation as it is a bet on how the exchange rates vary in the future. Logically, if the forecast is the successful speculator, this will make a profit, but if the opposite happens it will lose depending on when the price that has moved against it. The ease with which a speculator can win or lose money in the market has made this practice that has become infamous and has in many countries the speculator is under attack of the politicians who they blamed by the problems of their economies. While this in most cases is nothing more than pure demagoguery, it is also true that some individuals and the companies with large capital have become so powerful speculators that their decisions can significantly affect the economies of many countries.

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