At the moment, the global foreign market accounts for over $5 trillion U.S dollars which is worth the average daily trading volume, thus, making it one of the largest markets in the world. There is a growing class of derivative securities known as future Forex in this market.
A future Forex broker is one who trades in standardized futures contracts in order to buy or sell the currency at a set date, time and based on a contract size. These contracts are usually traded at one of the numerous futures exchanges that exist around the world. These future commodities are publicly traded by future Forex brokers in their specified contract size and settlement procedures. The selling of these specified contracts is guaranteed against credit losses by an intermediary, known as a clearinghouse. These clearinghouses provide guarantees through a process of gains and losses accumulated on a daily basis and are converted into real cash losses and debited or credited to the account holder.
HOW TO CHOOSE THE BEST FUTURE FOREX BROKER
Choosing the best future Forex broker is not quite different from the ways other brokers are chosen. The factors to be considered in this case should include the following;
Margin to future Forex broker refers to the initial amount of money deposited to meet a minimum requirement. This does not include borrowing and the initial margin usually acts as a form of good-faith which ensures both parties that are involved in a trade will fulfill their own side of the bargain. Future margins required by future Forex brokers are usually less than 10 percent or so of the futures price.
2. THE EXCHANGES:
Just like all other Forex brokerages, Forex futures are traded at exchanges around the world with the most popular situated in Chicago. The intending trader should carry out an in-depth research on the exchanges offered by the future Forex broker.
3. CONTRACTS SPECIFICATIONS AND THE TICK:
All future contracts under the future Forex brokers have been standardized by the exchange and have certain characteristics which may differentiate them from other contracts. A tick is usually unique to a single contract and it is important that the trader has an understanding of its properties.
CHARACTERISTICS OF FUTURE FOREX BROKERS
1. PROVISION OF HEDGING AND SPECULATING ACTIVITIES
Future Forex brokers provide a hedging and speculating activity in terms of mitigating the currency risk which the client is likely to face while trading in the market.
2. TRADING AND SPECULATING
The future Forex brokers just like the equities market also offer the types of a trading method which is dependent on the unique preference of the individual when it comes to both techniques and time frames.
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.