Forex Definitions

Before covering any tools and forex software, there are some financial definitions that everyone should be aware of in order to understand what the tools and software is trying to accomplish.  While these definitions are basic and there is considerably more information and function to them, this is only to provide reader with the information they need to help make a comprehensive decision on the forex software that will be discussed later in the article that they may wish to purchase. Text book word close-up

 

Exchange traded funds (ETFs) – open ended investment companies that can be traded all day which increases whenever the value of the United States dollar weakens
Forward – a forex transaction in which the currency changes hands on a future date with a rate decided upon the buyer and seller without regard to the current exchanges rates on the day the exchange occurs

Future – a forward transaction that comes with a standard size and maturity date that lasts for an average of three months without any interest amounts
Option – a forex or FX option is similar to futures and forwards in that the parties agree on an exchange rate, amount to trade hands, and a set date, but the seller has the right to decline the contract if they wish.  They are not obligated to make the exchange.
Spot – spot transactions are direct exchanges that take place over a two day time period between the buyer and seller, is cash oriented, and there is no interest involved
Swap – the most common forex forward transaction in which two participants ‘swap’ currencies for so long and then ‘swap’ it back at a later date.

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