Can someone please explain what a contract is...

I subscribe to Investica and they will mention, from time to time, that there are 18,000 long contracts on the Euro or 26,000 contracts, or whatever it might be.

What is a contract? Is there a specific amount of money associated to 1 contract- like one contract equals $100,000? Are contracts related to bigger market makers or does it include the retail traders like us? Is a contract on a particular currency and not a currency pair?

Let's say that Investica says there are estimated to be 26,000 long contracts on the Euro. They will then say that with this many long contracts out there, the Euro will struggle to make headway. Why would a high number of contracts in favor of that currency actually hinder it?

Thanks for any insight anyone can offer

I think they are talking about future contracts...The total number of contracts already open is called the open interest, which is the number of currently open contracts by traders and investors...I don't know the specs of the currency future contracts, but you can check this through the website of the exchange at which the contract is being traded...

26,000 contracts open for the EUR/USD means that there is 26,000 open contracts to buy a certain amount of Euros against the USD at a certain delivery date....Of course, for every long contract, there is a similar short contract position, for the guys who are long the contracts have already bought those contracts from some other guys who are short the contracts..

It is not important how many contracts are open (Although it is significant), but what's more important, how much new contracts were opened recently...For example, if today the open interest for the EUR/USD was 12,000 contracts, and tomorrow, 10,000 new contracts were opened, this means that we stand today at 22,000 contracts....In conjunction with the cash market price of the underlying, which is the EUR/USD, this gives a significant direction to the future of the underlying pair...

Hope that I have been of any help


Thanks,

Nader

It is a Derivative stated as having Open Interest as a measure of current "market anticipation" of a "future" price level.

They should be stating it as "Open Interest" and not "Contracts". However, just like the early days of the "PC" industry, the retail side of the Forex business is not fully "compatiable", yet.

We are working on it. Standards are sometimes slow in coming.

Eventually, everybody will be speaking the same language. Like PCI, USB, AGP, or DDO today for PC's. (or, was that yesterday. )