Jayden Forex trading futures are a type of financial futures, which are based on exchange rates. Forex trading futures involves the purchase and sale of an agreed quantity of another currency on an agreed date, at an exchange rate determined by the buyer and seller at the time of the transaction. The buying and selling of forex trading futures take place in specialised futures markets.
Forex futures trading, also known as currency futures, contracts the two parties are committed to delivering a specific standard quantity of forex, on a future date at a pre-agreed exchange rate, through the open bidding on the exchange.
Forex futures is the earliest appearance of a financial future, in 1972 IMM created the world’s first centralized forex exchange futures market.
At present, the United States Chicago Mercantile Exchange of the international currency market (IMM) and the United Kingdom London International Financial Futures Exchange (LIFFE) opened the forex futures market, the most varieties, the size and impact of the largest.
Some other major forex futures markets: Australia’s Sydney Futures Exchange (SFE), Singapore International Monetary Exchange (SIMEX), the U.S. Central American Commodity Exchange (MACE), Philadelphia Exchange (PBOT), Japan’s Tokyo International Financial Futures Exchange (TIFFE), Brazil International Financial Futures Exchange (BFE) and so on.
Why has the futures market developed rapidly in the last hundred years?
The main reason is that futures markets provide a way for commodity producers and users to avoid market price risk, while also providing opportunities for speculators to engage in speculative activities.
For example, a farmer expects that the wheat he planted earlier in the year will not be harvested until May. The farmer is concerned that the price of wheat may fall when it is harvested and shipped to market.
So, the farmer can hedge the price of wheat by selling wheat futures for delivery in May to cover the market risk.
The futures contract provides for a price of $5 per bushel of wheat to be traded. Suppose that in May, due to the good weather and a good harvest, the market price of wheat falls to $3 per bushel because the supply exceeds the demand, so that the farmer avoids losses.
The futures market should include at least two parts: one is the trading market, and the other is the clearing centre. After the buyer or seller of futures trades on the exchange, the clearing centre becomes the counterparty until the actual delivery of the futures contract. Forex futures trading requires a minimum of one contract to be bought and sold.
Forex futures exchange is engaged in forex futures trading place, it is autonomous management of non-profit organizations, in addition to providing futures exchange facilities, but also has a very sound management institution, responsible for the development of trading rules, the main terms of futures contracts and margin ratio, design and supervision of delivery procedures, management of the exchange members of the day-to-day business activities, and the collection of futures trading market will be spread to the rest of the world.
Each exchange has its own clearing centre, also known as a clearing agency, which is responsible for trading and registering futures contracts, collecting margins on futures transactions, and performing exchanges and settlements for member firms at the end of each business day. A clearing centre is a not-for-profit organization that may be an independent organization, an affiliate of an exchange, or owned by all or part of the clearing members of an exchange.
Members of the Exchange must apply separately in order to become Clearing Members. A Clearing Member may settle directly with the clearing centre; a Non-Clearing Member may not settle directly with the clearing centre, but must settle with the clearing centre through the Clearing Member after the transaction and pay a commission.
Forex trading futures trading for margin trading, that investors in the purchase and sale of forex trading goods contract, only according to the contract value of a certain percentage (generally not more than 10%) to pay the margin to deal, to be delivered and then according to the contract value to make up the remaining part. Investors in the forex trading futures trading, both can buy first after the sale, and also can sell first after the purchase, that is a two-way choice.
There are strict delivery dates for forex trading futures contracts, which are the 3rd Wednesday of the week in March, June, September and December of the year. Therefore, there are only 4 contract delivery dates during the year, but at other times buying and selling can take place without delivery, or one day later if banks are closed on the delivery date.
As forex futures contracts like the forward forex exchange contracts are also determined in advance by the price of forex exchange delivery (futures rate), the contract expires according to the pre-determined price of forex exchange delivery. Therefore, forex exchange futures contracts can also be used for hedging.
The hedging mechanism in futures trading is equally applicable in forex trading futures trading. A large number of investors are engaged in buying and selling forex trading futures contracts for the purpose of earning the difference in the fluctuating price of the contract, rather than for the purpose of acquiring another currency on the final settlement date. As a result, a large number of investors holding forex trading futures contracts will terminate their obligations to fulfil the contract by doing the opposite (i.e. hedging) before the final settlement date. Hedging mechanisms and margin trading provide a great convenience for investors engaging in forex trading futures.
Forex futures trading has a strong speculative function, which is due to:
(1) The trading amount of each forex futures trading contract is relatively small, it can meet the needs of various levels of speculators, especially suitable for the generally small and medium-sized enterprise owners or individual entry.
(2) Because the forex futures trading contract is a standardized contract, there is a high degree of liquidity, to meet the speculators according to the market changes quickly adjust the requirements of forex futures trading position.
For example, a speculator expects the pound exchange rate will fall, so he sold pound futures, in order to pound exchange rate fell to earn the difference.
However, after a period of time, due to changes in various factors in the market, the pound exchange rate is not down, but up, and has a strong upward trend.
In this case, speculators can quickly close their positions, and quickly buy the same amount of the same period of pound futures to reduce losses, or even after closing the position to buy further pound futures, in order to earn the benefits of the rise.
(3) Forex futures trading margin system, traders in forex futures trading, no need to hold forex exchange or local currency equal to the value of the futures contract, only a small deposit to the exchange. Therefore, forex trading futures have strong leverage, that is a small amount of money can be carried out in excess of the transaction. The leverage of forex futures trading is to meet the needs of speculators with high-risk tendencies.
