The forex market makes it possible for CFD traders in Singapore to purchase foreign currency to be able to trade these currencies for a profit. The foreign exchange market, also commonly referred to as the FX market, comprises of a network of currency traders from all over the world. These traders work round the clock trading currencies. This trading activity is among a range of factors that determine the exchange rates of different currencies globally.
There are different markets available for different traders of forex. Learning about these markets can be beneficial as it can determine what kind of a foreign exchange trader in Singapore you want to become.
The spot market
The spot market is the fastest transaction market in forex trading. Spot market transactions involve instant payment at current rates of exchange. This is referred to as the spot rate. According to the federal reserves, the spot market makes up one-third of the forex trading market. The trades take place within two days of an agreement. Even so, trading in the spot market leaves the trader vulnerable to market volatility which can affect the transaction rates between the time of agreement and trade.
An example of a spot market is an exchange booth in an airport. When an individual seeking to exchange currencies visits a booth and exchanges one currency for an equal amount in another currency, the client makes an ‘on spot’ currency transaction.
The futures market
As implied by the name, the futures market involves transactions that future deliveries and future payments. These transactions occur at an exchange rate that is agreed upon, referred to as the ‘future rate.’ Futures market contracts are standardized. This makes the terms of the agreement non-negotiable. This market protects traders from the volatility of the exchange market. The futures market is a trading option common amongst forex traders who make large transactions and prefer a steady return on their investment.
For instance, when a farmer gets into an agreement to sell the farm produce to a buyer in the next 3 months, they are guaranteed that their produce will sell as soon as it is harvested. The basis of the contract is a future price that is not subject to change.
The forward market
The transactions in the forward market resemble transactions in the futures market. The main difference between the two is that in the forward market, the terms of the agreement are negotiable. Forward market forex trading is flexible. In most cases, forward market transactions involve currency swaps. This happens when two trades swap currencies for some time and return the currencies after the expiration of the swap contract.
Participants in the forex markets
There are at least five entities that make use of forex markets every day. Commercial banks are the leading participants and offer the largest market share in currency transactions. Other traditional players include the central bank of Singapore ad mages the money supplies in the markets. Forex brokers are the go-between between banks and individual investors. Speculators and traders work to benefit from short term market trends in the forex trade markets.
Where the transactions take place
While some forex transactions take place in the Singapore stock exchange, most forex transactions take place online through a computer or a mobile device. More than $180 billion is exchanged by traders online. Singapore is one of the many forex markets that contribute mainly to these daily transactions globally.
Trading forex online
For you to take advantage of any of these markets, you will need to have a forex broker. This gives you access to online forex trading platforms. These platforms enable you to trade with real money, therefore taking advantage of the forex market changes in real-time. When testing out a trading platform, consider trading using a demo account. This will give you an idea of the experience to expect when trading on the platform without risking real money.
When choosing an online forex trading platform in Singapore, ensure that it is registered with the relevant authorities. This is the best way to guarantee the safety of your data online.