Although the currency exchange market is not really what we can call as a newbie-friendly business, a lot of people want to learn forex day trading basics so that they can see for themselves if this earning opportunity if the right one for them.
And the first lesson in forex day trading basics lies in knowing the different kinds of trading systems in this industry.
Day Trading Basics Lesson 1: Currency Spot Trading
Currency spot trading means exactly what its name implies: trading currencies on the spot. This occurs when one investor agrees with another investor to trade currencies during the course of trading hours. These investors should be able to complete their trade within 48 hours, given the volatile nature of currency exchange rates.
The only exception to this rule is when Canadian dollar is involved, in which case, the trade must be completed within a day's time.
Day Trading Basics 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 on currencies now and reaping its benefits later on.]
For the purpose of studying day trading basics, please take note that currencies traded in this kind of system depend on the value of the currencies at the time they change hands. If they will depend on the value of the currency at the time the deal was made, then it won't be a forward trading setup, rather, it will fall under the system we will be discussing next.
Day Trading Basics Lesson 3: Future Currency Trading
Future currency trading is somewhat similar to forward currency trading. The only 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.
Day Trading Basics Lesson 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.