Forex Market or Foreign Exchange Market is different from the traditional markets. There is no specific geographical location for it. Wherever the currency exchange trade is carried on it becomes the Forex Market, the platform for forex trading.
Individuals however constitute only a tiny part of the Forex Market. Most of the transactions in this market are carried out by professional brokers. Yet it is one of the largest markets of the world. Today the Forex Market deals in billions of dollars and is the largest platform for financial transactions in form of forex trading.
International banks, multinational corporations, governments, and many other financial institutions have moved in the Forex Market especially for the currency trading. Many other financial institutions are also using the platform.
The Forex Market first made its appearance as cash inter-bank with the floating exchange rates coming up. In many ways the market is unique because of its extreme liquid character, geographical dispersion, very high trading volumes, equally large number of traders in the Forex Market and above all the 24/7 transaction hours for forex trading..
Financial instruments of different types that are used in the Forex Market include forward transaction, futures, swap, and spot methods.
In forward transactions the buyer and seller agrees on the exchange rate in advance for any future dates regardless of existing market rates at that particular point of time in the Forex Market. Futures on the other hand are an exchange that is created with a specific time span. The normal time span is around three months and the rates include interests accrued in Forex Trading. .
Two other methods used in the financial transactions in Forex Market are swap and spot. In Swap the parties concerned exchange the currencies for a fixed time span and thereafter reverse the process. The spot in Forex Market is a two-day delivery transaction system of forex trading.
The major difference between futures and spot in Forex Market is that in future the interest rate is in built while in spot the interest rate is not taken into account as it is basically a cash market.