Types of forex trading

There are several different types of forex trades to be aware of. As you grow your confidence in the market and learn the ropes of forex trading, you may wish to add more types of trading to your repertoire, starting simply and working up to more complex strategies.

• Spot trading

Forex spot trading means opening positions based on the current spot rate. This is the rate at which currencies are traded at that exact moment in the market. In some senses, this is the simplest form of trading as the spot rate can be easily read and understood.

• Forwards

In forex trading, forwards are agreements to execute a trade on a predetermined position at a designated future data. When traders use forwards, they are contractually obliged to fulfil the agreement and to complete the trade. They can lock in the currency pair price for the duration of the forwards contract.

• Options

Forex traders can take out options on currency positions. This means they have the opportunity to execute a trade on their chosen currency pair for the length of the option term. Similar to forwards but fundamentally different, options do not carry the obligation to complete the trade.

• Swaps

A forex swap is an agreement to trade one currency with an equivalent amount in 

another country. Unlike some other types of trading, swaps allow traders to speculate on price movements by taking ownership of the currency rather than simply wagering on future market performance.

• Futures

A futures contract is similar to a forwards contract — both lock in a price for buying and selling at a future date. However, futures are standardised contracts, while forwards can be customised to meet the trader’s needs.

Get started with forex trading at VT Markets

With VT Markets, you gain access to one of the leading forex platforms in the market, providing all the tools you need to begin — or to continue — your forex trading journey. Set up a demo account and build your confidence in the market, then graduate up to a full trading account. Want to learn more? Reach out to our team directly.

FAQs

What does forex (FX) trading mean?

What is forex trading, exactly? Forex trading simply means opening positions on the forex market — otherwise known as the foreign exchange market. It is this market that determines the relative worth of currencies around the world based on price movements against one another. For example, the United States Dollar — represented on forex as USD — may increase in value, but if the Australian Dollar (AUD) grows at the same pace, its relative exchange rate will be unchanged. On the other hand, if the AUD strengthens against the USD, it will take fewer US dollars to match an equivalent value of Australian dollars.

So, how to trade in forex? When individuals trade on the FX market, they are essentially speculating on these price movements. They are predicting which direction a certain currency pair will move and then wagering on this move. If the market moves in its predicted direction, the trader takes a profit. If it does not, they absorb the loss.

Is there a difference between forex trading and currency trading?

Forex trading and currency trading generally refer to the same thing. However, forex trading tends to be more specific, referring to any trades made across the foreign exchange network that bring together national currencies from all over the world. Individuals can trade currencies in other ways — for example, trading digital or cryptocurrencies across a different type of exchange. But in most cases, forex trading and currency trading are synonymous.

How can I make money from forex trading?

Forex traders can profit from the FX market if their predictions are correct. If the trader believes a currency pair will grow in value, they can open a buying position and make money from this trade if their predictions are correct. On the other hand, if the trader believes the value will fall, they can open a selling position and profit as a result.

It is possible to increase market exposure by using leverage in FX. This means traders can increase their potential profits but also increase the risk of the trade. A leverage strategy can result in significant losses, so traders should tread carefully in the market.

How can I get started trading FX?

The best way to get started with trading FX is always the safest, most conservative way. By adopting a careful and responsible approach from the outset, traders can grow their experience in the FX market and trade with confidence and knowledge. While there are no guarantees in forex trading, this does make it easier to build a successful trading strategy for the future.

Use a demo account to get started. This demo account allows you to use all of the trading features and dashboard screens you would use in the live market, but with none of the risk. You will make practice trades and opening and closing positions, but you won’t have to put any money down.

What costs and fees do you have to pay when currency trading?

There will be fees, charges and expenses associated with currency trading. You will usually have to pay a commission fee to the broker platform — i.e., a fee for helping you to find and open the position — but this may simply be built into the spread of the currency pair. At VT Markets, we aim to keep fees low, supporting a positive experience for traders.

Some platforms may charge other fees. For example, fees may be payable after a period of inactivity or charges applied to deposits and withdrawals. VT Markets does not charge these additional fees to users.

How much money is traded on the forex market daily?

A survey conducted in 2019 showed that $6.6 trillion is traded on the forex market every day on average. The survey is conducted every three years, which means another set of findings should be released in 2022. These figures put the forex market in first place worldwide — no other financial market rivals forex in terms of trade volume.

Is forex trading income taxable?

In Australia, forex trading is recognised as a legitimate source of income; indeed, many traders can earn a living from their forex trades — although this is not guaranteed, and even experienced traders encounter risk daily. With this in mind, the Australian Taxation Office applies taxation to forex revenue.

This tax also applies to non-residents in Australia. You will have to pay tax on any profits made while trading through an Australian broker or exchange, even if you are not a citizen or resident of the country.

What are gaps in forex trading?

You may hear talk of gaps in the FX market, but what are these forex trading gaps? A gap is a sharp price movement involving a forex pair, in which the pair moves significantly up or down from one price point to another, with no trading increments in between. Generally, forex price movements happen in pips — a pip in forex stands for “percentage in point” — so traders can see which way the market is moving. However, sudden changes in available economic data or in the global geo-political situation can cause a rapid movement, known as a gap.

Traders are most likely to encounter gaps after the weekend. This is because the exchange is closed over the weekend, so there is more time between trades for an external event. Despite this, gaps can still appear anytime over the trading week.

Trade with an award-winning broker

Trading forex with VT Markets means trading with an award-winning brokerage you can trust. At VT Markets, you’re treated to tight spreads to help keep your trading costs low, without needing to worry about pesky requotes. These features, plus all the best tools and services, make VT Markets the perfect trading partner for you. Set up a demo account now to build your confidence in the market, then graduate to a full trading account.

The US is scheduled to report its ISM Services PMI this week, with interest rates data from the Reserve Bank of Australia, Bank of Canada, and the European Central Bank also due. Investors also anticipate GDP and Employment condition data from Australia and Canada, respectively.

Image source: forexfactory.com 

RBA Rate Statement | 6 September 2022

The Reserve Bank of Australia (RBA) raised the cash rate by 50bps to 1.85% during its August meeting, following 50-bps hikes in July and June and 25bps in May. This brings the cash rate to a level not seen since April 2016.

According to the board, rate hikes over the past few months were necessary to bring inflation down and to create a more sustainable demand and supply, adding that it would be taking further tightening measures.

Analysts predict that RBA will raise its benchmark interest rate by another 50bps at this month’s board meeting.

US ISM Services PMI | 6 September 2022

ISM Services PMI increased more than expected in July of 2022, reaching 56.7, the highest level in three months. 

Analysts had predicted that the index would be at 54.8.

Australian Gross Domestic Product | 7 September 2022

According to the Australian Bureau of Statistics, the Australian economy expanded by 0.8% in the first quarter of 2022. This was the second consecutive quarter of growth, following a contraction in the third quarter because of the Delta outbreak. 

We expect economic activity to remain resilient during the second quarter, with additional 1.3% growth.

Bank of Canada Rate Statement | 7 September 2022 

The Bank of Canada (BoC) raised the target for its overnight rate by 1% to 2.5% on 13 July 2022, a move not seen since 1998, surprising market-watchers expecting a 75bps hike. The BoC further signalled that it would continue to hike interest rates in the coming meeting to curb rising inflation.

The BoC will likely raise its overnight rate by 25bps in September, taking its official cash rate to 2.75%.

ECB Press Conference and Interest Rate Decision | 8 September 2022 

The European Central Bank (ECB) increased its key interest rate by 50bps at its July 2022 meeting, the first increase since 2011. The move ends its eighth year of negative rates after years of keeping rates low to stimulate growth and inflation.

The European Central Bank’s policymakers said that the 50bps rate hike in July was necessary as a form of frontloading, bringing forward a policy move to increase the effectiveness of its price stability mandate. The minutes from the ECB’s July meeting said they wanted to normalise monetary policy rather than indicate a change in the rate to be expected as the end point of the normalisation cycle.

Analysts expect that ECB will raise its interest rate by another 50bps.

Canadian Employment Data | 9 September 2022

The Canadian economy lost over 30,000 jobs in July, extending the 43,000 cuts from the previous month. The unemployment rate remained at 4.9%, the lowest on record. Analysts forecast another 20,000 additional jobs for August, which would cause the unemployment rate to remain at 4.9%.

Dear Client,

Warmly reminds you that the component stocks in the stock index spot generate dividends. When dividends are distributed, VT Markets will make dividends and deductions for the clients who hold the trading products after the close of the day before the ex-dividend date.

Indices dividends will not be paid/charged as an inclusion along with the swap component. It will be executed separately through a balance statement directly to your trading account, the comment for which will be in the following format “Div & Product Name & Net Volume ”.

Please note the specific adjustments as follows:

The above data is for reference only, please refer to the MT4/MT5 software for specific data.

If you’d like more information, please don’t hesitate to contact cs@vtmarkets.com.

Dear Client,

Warmly reminds you that the component stocks in the stock index spot generate dividends. When dividends are distributed, VT Markets will make dividends and deductions for the clients who hold the trading products after the close of the day before the ex-dividend date.

Indices dividends will not be paid/charged as an inclusion along with the swap component. It will be executed separately through a balance statement directly to your trading account, the comment for which will be in the following format “Div & Product Name & Net Volume ”.

Please note the specific adjustments as follows:

The above data is for reference only, please refer to the MT4/MT5 software for specific data.

If you’d like more information, please don’t hesitate to contact cs@vtmarkets.com.

Dear Client,

Warmly reminds you that the component stocks in the stock index spot generate dividends. When dividends are distributed, VT Markets will make dividends and deductions for the clients who hold the trading products after the close of the day before the ex-dividend date.

Indices dividends will not be paid/charged as an inclusion along with the swap component. It will be executed separately through a balance statement directly to your trading account, the comment for which will be in the following format “Div & Product Name & Net Volume ”.

Please note the specific adjustments as follows:

The above data is for reference only, please refer to the MT4/MT5 software for specific data.

If you’d like more information, please don’t hesitate to contact cs@vtmarkets.com.

Dear Client,

Warmly reminds you that the component stocks in the stock index spot generate dividends. When dividends are distributed, VT Markets will make dividends and deductions for the clients who hold the trading products after the close of the day before the ex-dividend date.

Indices dividends will not be paid/charged as an inclusion along with the swap component. It will be executed separately through a balance statement directly to your trading account, the comment for which will be in the following format “Div & Product Name & Net Volume ”.

Please note the specific adjustments as follows:

The above data is for reference only, please refer to the MT4/MT5 software for specific data.

If you’d like more information, please don’t hesitate to contact cs@vtmarkets.com.

Dear Client,

Warmly reminds you that the component stocks in the stock index spot generate dividends. When dividends are distributed, VT Markets will make dividends and deductions for the clients who hold the trading products after the close of the day before the ex-dividend date.

Indices dividends will not be paid/charged as an inclusion along with the swap component. It will be executed separately through a balance statement directly to your trading account, the comment for which will be in the following format “Div & Product Name & Net Volume ”.

Please note the specific adjustments as follows:

The above data is for reference only, please refer to the MT4/MT5 software for specific data.

If you’d like more information, please don’t hesitate to contact cs@vtmarkets.com.

Best Affiliate Programme, Ultimate Fintech Awards 2022

VT Markets, the international multi-asset broker, is proud to announce that it has clinched the “Best Affiliate Program” at the prestigious Ultimate Fintech Awards 2022, hosted by iFX EXPO International. This globally respected award recognises VT Markets’ large and trusted affiliate network across the world. 

VT Markets’ impeccable industry-leading Affiliate Partnership programme consistently delivers innovative trading product and service offerings, attractive and transparent commissions, advanced marketing and institutional solutions designed to ensure the success of its affiliates. 

Yiangos Georgiou, Director of Business Development, comments: “Fostering successful affiliate partnerships has always been one of our top priorities as we understand the importance of our international affiliates in expanding our markets globally. We are committed to developing and nurturing these partnerships to help our affiliates achieve sustainable growth as an essential part of our global expansion journey.” 

Best Mobile App Europe 2022 (Forex Division)

VT Markets won the “Best Mobile App Europe 2022 (Forex Division)” award with its recently relaunched trading app. It is recognised for creating a secure and integrated trading app that stays true to the brand promise of “Trading can be easy”.

It provides clients with real-time price alerts, performance analytics and smart signals newsletter. It gives in-depth product information with corresponding market analysis and economic news.  The enhanced user interface offers excellent accessibility and over 80 payment methods. 

An exciting new feature is “Big Movers” which alerts clients on major market shifts and trading opportunities in the previous 24 hours. The “Learn” feature provides valuable educational trading content.

Timothy Lee, Integrated App Marketing Manager comments: “VT Markets has made tremendous investments to bring significant improvements to our mobile offerings and trading platform and this is reflected in the positive feedback from our global clients since our app relaunch. We will continue to invest in innovative features to provide the most optimal trading experience for all our clients.” 

The VT Markets trading app is available for download from the Apple App Store and Google Play Store.

Other Awards

VT Markets have received numerous awards this year that recognises it as the innovative market leader in the industry:

• Best Forex Broker Europe 2022, International Business Magazine
• Best Partnership Programme Global 2022, Global Business Review Magazine
• Best Customer Support UK 2022, World Business Outlook Awards

VT Markets relaunches its secure and integrated trading app that offers a seamless online mobile experience. It is designed using the updated technologies to provide clients with the most optimal trading experience with real-time price alerts, performance analytics and smart signals newsletter. Clients benefit from in-depth information about their desired trading product with corresponding market analysis and economic news. They get a weekly summary which provides an analysis of their trading portfolio and performance.

The enhanced user interface offers excellent accessibility. They can easily access their trading positions, accounts, deposits, funds and coupons, place orders and gain access to over 80 payment methods in different countries. Clients can trade on the move and never miss a trading opportunity. 

An exciting new feature is “Big Movers” which alerts clients on major market shifts, economic news highlights and trading opportunities in the previous 24 hours. This gives key market insights and analysis to a tech savvy audience to empower them to make more informed and timely trading decisions. VT Markets invests in the success and learning journey of its clients by developing an extensive “Learn” feature in the app to provide valuable educational content to continuously expand their trading knowledge and expertise. 

Timothy Lee, Integrated App Marketing Manager comments: “VT Markets has made tremendous investments to bring significant improvements to our mobile offerings and trading platform and this is reflected in the positive feedback from our global clients since our app relaunch. We are delighted to receive Best Mobile App Europe 2022 and will continue to invest in innovative new features to deliver top-class customer service to our clients allowing them to trade with ease wherever they are. With a clear vision of a multi-asset global trading app and more exciting features like in-app promotions and educational videos planned for the upcoming months, we strive to provide the most optimal trading experience and make trading easy for all our clients.” 

The VT Markets trading app is available for download from the Apple App Store and Google Play Store.

About VT Markets

VT Markets is a global, regulated, multi-asset broker with experience and expertise in financial markets in over 160 countries. It believes that trading should be accessible and easy and aims to provide their clients with a superior and trusted trading environment, offering true ECN accounts with raw spreads, a powerful client portal, and a 24/7 award-winning customer service.   

Its next generation platform makes it effortless to invest in more than 1000 assets, including forex, commodities, indices, and CFD shares with transparency and safety. From gold to FX currencies, trades are executed with lightning-fast speed to guarantee low latency orders and improve chances of profitability. It strives to establish its international branding as the innovative market leader in the trading industry. 

The US market is focusing on Non-Farm employment figures this week. The economy added 372,000 payrolls in June of 2022, which is higher than the market forecast of 268,000. Meanwhile, the July projection is at 255,000 additional jobs.

US unemployment rate remains the same in June 2022 at 3.6%, which is similar to the previous months and remains the lowest since February. Market projections are still at 3.6%.

Investors are also keenly anticipating the interest rate decisions of two major central banks: the Bank of England (BoE) and the Reserve Bank of Australia (RBA).

The Bank of England announced its fifth consecutive interest rate hike in June 2022, with a primary bank rate of 25bps to 1.25%, the largest in 13 years to battle inflation. BoE is committed to decreasing inflation to 2%.

BoE also anticipates an inflation rate of above 9% in the following months and above 11% in October. Meanwhile, the Gross Domestic Product (GDP) growth is expected to go down in the first half of the forecast year, which may lead to a 25bps hike in August.

The Reserve Bank of Australia increased its cash rate by 50 bps to 1.35% in July, following the 50bps hike in June and 25bps hike in May. According to the board, there is no need for massive monetary support given the economy’s strength and price pressures. In addition, they are committed to strengthening the amount and timing guided by incoming data. Market analysts forecast a 50bps hike in August.