Forward market How forward market works A forward market leads to the creation of forwarding contracts. While forward contracts—like futures contracts—may be used for both hedging and speculation, there are some notable differences between the two. Forward contracts can be customized to fit a customer’s requirements, while futures contracts have standardized features in terms of their contract size and maturity. Forwards execute…
Spot market A spot market is where financial instruments are exchanged for immediate delivery, such as commodities, currencies, and securities. Delivery, here, means cash exchange for a financial tool. In comparison, a futures contract is based on the delivery of the underlying asset at a future date. Over-the-counter (OTC) markets and exchanges may provide spot trading and/or futures trading. How Spot Markets Work Spot markets are also referred…
Margin Call To understand a forex margin call, it is essential to know about the interrelated concepts of margin and leverage. Margin and leverage are two sides of the same coin. Margin is the minimum amount of money required to place a leveraged trade. Leverage provides traders with greater exposure to markets without having to fund the…
Currency Revaluation What is Currency Revaluation? In a fixed exchange rate regime, only a decision by a country’s government, such as its central bank, can alter the official value of the currency. Developing economies are more likely to use a fixed-rate system to limit speculation and provide a stable system. A floating rate is the opposite of a…
Currency Depreciation Understanding Currency Depreciation Countries with weak economic fundamentals, such as chronic current account deficits and high rates of inflation, generally have depreciating currencies. Currency depreciation, if orderly and gradual, improves a nation’s export competitiveness and may improve its trade deficit over time. But an abrupt and sizable currency depreciation may scare foreign investors…
Currency Appreciation Currency appreciation in the same context is an increase in the value of the currency. Short-term changes in the value of a currency are reflected in changes in the exchange rate. Basics of Currency Appreciation In a floating rate exchange system, the value of a currency constantly changes based on supply and demand. Therefore, the…
How is forex profit calculated Calculating Profit and Loss How forex profit is calculated? The actual calculation of profit and loss in a position is quite straightforward. To calculate the P&L of a position, what you need is the position size and the number of pips the price has moved. Therefore, the actual profit or…
Resistance Level The resistance level can visualize using different technical indicators rather than simply drawing a line connecting highs. What is Resistance? Initially, the resistance level on a candlestick chart is the price when you can expect more sellers than buyers. It prevents the price from rising further and the resistance levels indicate a price…
Support Level Support level occurs where a downtrend expects to pause due to a concentration of demand. It refers to the price level that an asset does not fall below for a period of time. Buyers, entering the market whenever the asset dips to a lower price, create an asset’s support level. In technical analysis,…
Capital Loss A capital loss is when the value decreases for a capital asset, such as an investment or real estate. This loss will not realise until the sold asset is for a price lower than the purchase price originally. It is a difference between the purchase price and the selling price of the asset,…