Like other instances in which they are used, bar charts provide more price information than line charts. Colors are sometimes used to indicate price movement, with green or white used for periods of rising prices and red or black for a period during which prices declined. Each bar chart represents one day of trading and contains the opening price, highest price, lowest price, and closing price (OHLC) for a trade. A dash on the left represents the day’s opening price, and a similar one on the right represents the closing price.

The spot market is where currencies are bought. It is a bilateral transaction in which one party delivers an agreed-upon currency amount to the counterparty. After a position is closed, it is settled in cash. A forward contract is a private agreement between two parties to buy a currency at a future date and a predetermined price in the OTC markets. Although the spot market is commonly known as one that deals with transactions in the present (rather than in the future), these trades take two days to settle. Receives a specified amount of another currency at the agreed-upon exchange rate value. Sold based on their trading price. A finalized deal on the spot market is known as a spot deal.

Instead, it is a series of connected trading terminals and computer networks. Commercial and investment banks still conduct most of the trading in forex markets on behalf of their clients. But there are also opportunities for professional. Market participants are institutions, investment banks, commercial banks, and retail investors from around the world. Most currency traders were large multinational corporations, hedge funds, or high-net-worth individuals (HNWIs) because forex trading required a lot of capital. Currency trading was very difficult for individual investors until it made its way onto the internet. Who Trades on It? Individual investors to trade one currency against another.

You can earn the interest rate differential between two currencies. This strategy is sometimes referred to as a carry trade. For instance, before the 2008 financial crisis, shorting the Japanese yen (JPY) and buying British pounds (GBP) was common because the interest rate differential was substantial. You can profit from changes in the exchange rate. So, you can profit from the difference between two interest rates in two different economies by buying the currency with the higher interest rate and shorting the currency with the lower interest rate.