Since forex provides wide spectrum, traders invent a number of different ways to invest and speculate in currencies. From numbers of those ways, there are some most popular ways to trade forex.
That includes spot forex, currency futures, currency options, and currency exchange-traded funds (ETFs).
1. Spot Forex
In spot forex, currencies are traded on the spot. It is directly traded by using the current market price.
This ways becomes popular due to its simplicity, liquidity, tight spreads, and round-the-clock operations. Moreover, it is very easy to participate in this market since accounts can be opened with as little as $50.
Aside from that, in this ways most forex brokers usually provide charts, news, and research for free.
2. Currency Futures
In currency futures, there is a contract to buy or sell a certain asset at a specified price on a future date. It was created by the Chicago Mercantile Exchange, in 1972.
Currency futures is very transparent and well-regulated since the contracts are standardized and traded on a centralized exchange.
3. Currency Options
This financial instrument gives the buyer the right or the option to buy or sell an asset at a specified price on the option’s expiration date. If a trader “sold” an option, then he or she would be obliged to buy or sell an asset at a specific price at the expiration date.
Yet, the disadvantage of this way is the limited option of market hours for several options. Besides, its liquidity is also not as good as the other ways.
Also read: Forex Brokers With Copy Trading Platforms
4. Exchange-Trade Funds (ETFs)
It is the youngest way in the forex world. ETF offers exposure to a single currency or basket of currencies.
ETFs are created and managed by financial institutions who buy and hold currencies in a fund. They then offer shares of the fund to the public on an exchange allowing you to buy and trade these shares just like stocks.
However, ETFs also has time limitation, it is not open 24 hours. Besides, it also subjects to many transaction costs.
