Basic question - what do we trade?

Hello
A friend of mine has asked me "what do you trade? do you buy/sell the currency itself, or some derivatives like options, futures or what?" Shame on me - I couldn't answer the questions precisely
Can you help me?

Another thing, concerning the "enormous spike..." thread: Is it actually really so, that if one of us enters long for a $1.000.000 position then the currency price itself goes up?

Thanks in advance!


My short scalping report for the last week: 32 trades, 20 wins, 47 pips. Scalping rules

We're trading human emotions

Basically, we are trading spot currencies, which does not include any futures or options...However, it depends, some members here trade futures or options on futures...

You can get a good answer for your question by searching www.investopedia.com for the definitions of spots, futures and options...


Thanks,

Nader

I wonder myself sometimes. I buy/sell spot FX through a retail broker so I don't think I'm trading anything in the "real" market other than the charts they show me.

I also trade Index CFDs. These again, don't really exist, so if I was to be honest I don't think I "trade" anything.

But my bank balance goes up and down so perhaps I'm trading that??

you are trading spot forex, which means actual cash.

when you buy 1 LOT of the EURUSD, you are buying $100,000 worth of Euros. you are not doing the physical transaction of actually giving the dollars to someone and taking delivery of the euros, but all of that is going on behind every trade you make. its not just trading lines on charts, there is a complex network of banks that are supporting this infrastructure.

if you really want to understand the inter-workings of the forex market, you should read Cornelius Luca's "Trading in the Global Currency Market". he gives detailed insight of the interbank network, explains the history of the market and has a lot of info on settlement procedures. this book wont necessarily make you a great trader, but you'll be able to answer questions like that posed to you by your friend