Currently the total value of Forex trading is more than $4 trillion per day, which is higher than traditional derivatives whose daily trading volume is $3.7 trillion. The most common instruments traded in the foreign exchange market are the following:
Spot Currency Transactions (Spot Market): These trades are commonly known in English as Foreign Exchange Spot Trading . In this case consist of buying / selling currencies with a shipment that can last up to 2 business days of the contract of the transaction.
Foreign exchange-based financial options: These options are known as Foreign Exchange Options , which provide the buyer with the non-compulsory right to acquire or sell a currency for another at a predetermined price or rate on a predetermined date in the contract. It is a derivative of the Over The Counter type (it is not traded in a central market, transactions are performed directly between the two parties).
Foreign Exchange Futures Contracts: These contracts, also known as Foreign Exchange Futures , consist of a currency exchange agreement at a predetermined date in the future at a price specified in the contract. Unlike options trades, Futures transactions are not traded in Over The Counter markets.
Forward Currency Futures: It is called Outright Forward and basically consist of an exchange of one currency by another at the price of a pre-established future date.
Non-traded currency contracts: These financial products are known as Nondeliverable Forwards . These are contracts that are usually traded on a trans-territorial basis and in which settlement is carried out based on different currencies. They offer the investor the possibility of having exposure to a currency, but without having to pay or receive such currency.
Foreign exchange swaps: These instruments, also known as Foreign Exchange Swaps, are contracts between two counterparties (a buyer and a seller) for the purchase and sale of a certain amount of foreign exchange (for the exchange of a future series of interest payments and Principal) in which one of the counterparties pays in one currency while the other party pays in another currency. There are currently several types of currency swaps.
Investment fund management companies
These are companies that operate in the foreign exchange market in order to gain access to the financial markets of different countries in such a way that they can invest in different assets such as stocks, bonds and others on behalf of their clients and with the capital of these .
Private investors (traders) through intermediaries (brokers )
Today there are companies that specialize in providing services of participation and support to private operators in the Forex market, offering different types of services designed for this purpose. In this way, we have brokers or financial intermediaries, which offer operators the possibility of opening a trading account in a particular currency (usually USD or EUR) to carry out foreign exchange purchase and sale transactions through channels (In most cases transactions are carried out over the Internet or via telephone), in order to obtain income based on the exchange rate fluctuations of the different currencies against each other (for example, against the US dollar , Dollar against the Yen, Euro against the Yen, etc.).
Due to their importance in the financial system and the seriousness of their work, these firms are usually subject to various controls and audits depending on the country of origin. However, when choosing a broker to operate in the market, the trader must investigate its reputation, strength, quality of services and legal framework under which it is governed.