We explore four of the different types of forex trades available for private traders
A simple way to trade forex, they can be purchased at any time during a trading day, and will close out automatically at the end of a day’s trading business. They will tend to reflect the underlying spot price for a particular FX pair. They are considered more suitable for traders seeking to capitalise on short term price movements.
Unlike the daily trade (above), a rolling trade can be used to keep a position open overnight or indefinitely. It does not need to be closed out at the end of the day. However, you will usually be charged a small fee by your broker if you keep it open overnight. Rolling trades are good if you see yourself keeping a trade open for a small number of days, but are to be avoided for longer periods, as they can become quite expensive.
A binary trade or bet is becoming more popular in the retail FX trading market: binary contracts are based on a more absolute result – will a particular price close up or down at the end of a specific period? Binary bets are usually calculated by subtracting the number quoted and multiplying this by the amount of your stake. You are in control of your possible maximum loss and each bet will have a quoted lifespan. These trades seem to provide traders with more peace of mind.
More sophisticated trades are now available in a DIY format, particularly for traders using financial spread betting accounts in the UK. They work in a similar format to binary bets, but the broker quote is only made once you have decided the key criteria, like time frame and which currency pairs will be involved. Shorter term DIY contracts will tend to be restricted to the more liquid pairs. In some respects, DIY trades resemble what professional traders and investors have been doing in the over the counter market for some time now.