Being a $2 trillion a year industry, many people want to try the foreign exhange market to earn an extra income from home. The sad truth is that most of them will fail because they overlooked the day trading basics.
There is a lot of money to be made in the forex market, but it's not really, what we can call as a newbie-friendly business.
Let's take a short day trading basics lessons...
There are 4 kinds of forex trading setups. Each of them has its own pros and cons. Essential in day trading basics is determining which of these systems is the right one for the novice investor.
Setup 1: Currency Spot Trading
With this method, you trade currency on the spot. It's the most popular setup accounting for 37% of the total number of transactions in the industry.
Basically, an investor agrees with another investor to trade currencies during the course of trading hours. Spot trading involves the trading of currencies deliverable within 2 days,
Setup 2: Forward Currency Trading
This kind of trading involves the trading of currencies the delivery of which can be effectuated somewhere between 3 days to 3 years.
This kind is for investors who want to take the speculative game a little further, by investing on currencies now and reaping its benefits later on.
Setup 3: Future Currency Trading
Future currency trading is somewhat similar to forward currency trading.
So what is the difference?
Whereas in forward currency trading, the parties have to exchange currencies based on their values at the time the trade is consummated, in future currency trading, the trade will depend on the value of the currencies at the time the agreement is made.
We can say, for the sake of this lesson on day trading basics, that future currency trading is a combination of spot currency trading and forward currency trading.
Setup 4: Options Currency Trading
In options currency trading, the buyer buys the "option" to trade a particular currency for a particular price at a particular period he will name. The seller will be obliged to deliver the particular currency in accordance with the terms provided by the buyer.
Indeed, options currency trading is a forex exchange system that involves options to purchase currencies at "preserved" prices.