Foreign exchange generally involves currency pairs. Thus, the choice of combinations is, of course, almost unlimited. However, some currencies are traded more frequently than others. In the first place are the currencies of the major economic areas. These include the US dollar, the euro and the Japanese yen. The different combinations of these pairs are very popular and are offered by all brokers. Furthermore, the British pound sterling and the Swiss franc are also often traded. Other currency pairs are very much broker dependent, although most providers also carry these in their portfolio. These include the rupee, the dinar and the ruble, as well as some other very localized currencies.
Forex trading with these derivatives can generate high returns under certain circumstances, but also involves considerable risks, as it is often very difficult to estimate the development of a rate. Therefore, in most cases, these currencies are used only by experienced traders to optimize their returns. Statistical surveys prove that the dollar, the yen, the euro, the British pound and the Swiss franc are usually traded. Almost all combinations are possible here.
What returns can be expected?
The amount of the respective return on a trade always depends on the type of trade and the amount of capital invested. Thus, the more units are bought, the higher the expected return in case of success. As a rule, swap trades achieve the highest returns, as they involve trading in highly speculative derivatives. Basically, the higher the risk, the more profit can be expected. In second place are forward exchange transactions. Due to their hedge character, they offer a high return, while the risk is somewhat more manageable. Especially the fact that many derivatives are issued by banks makes this type of trading very interesting for securing returns.
High profits can also be achieved with spot foreign exchange trades. This type of transactions is most often traded on the Forex market. The risk is kept within limits and the returns reach a reasonable level. The smallest profits are achieved with currency options, but it is also the safest type. Here everything runs according to the principle, everything can, not must. Since the buyer is free to buy or sell at the agreed time, he can analyze the market situation in detail and change his mind at any time if necessary.
Types of trading
This includes all types of swap transactions. An essential criterion here is that a spot foreign exchange transaction can always be swapped with a forward transaction. Therefore, this type of Forex trading is also counted among the exchange rate swap transactions. Currency option transactions are a completely separate variant. All types of transactions are usually found with a broker. These can be combined partly also among themselves. The only exception here are the currency option transactions, where the right to buy or sell is only granted to one trader.
