Spot Exchange Rate Transactions!!! For most spot foreign exchange transactions, the settlement date is two business days after the transaction date. The most common exception to the rule is the U.S. dollar vs. the Canadian dollar, which settles on the next business day. Weekends and holidays mean that two business days is often far more than two calendar days, especially during the Christmas and Easter holiday season. On the transaction date, the two parties involved in the transaction agree on the price, which is the number of units of currency A that will be exchanged for currency B. The parties also agree on the value of the transaction in both currencies and the settlement date. If both currencies are to be delivered, the parties also exchange bank information. Speculators often buy and sell multiple times for the same settlement date, in which case the transactions are netted and only the gain or loss is settled. The Spot Market!!! The foreign exchange spot market can be very volatile. In the short term, rates are often driven by news, speculation and technical trading. In the long term, rates are generally driven by a combination of national economic fundamentals and interest rate differentials. Central banks sometimes intervene to smooth the market, either by buying or selling the local currency or by adjusting interest rates. Countries with large foreign currency reserves are much better positioned to influence their domestic currency’s spot exchange rate. How to Execute a Spot Exchange!!! There are a number of different ways in which traders can execute a spot exchange, especially with the advent of online trading systems. The exchange can be made directly between two parties, eliminating the need for a third party. Electronic broking systems may also be used, where dealers can make their trades through an automated order matching system. Traders can also use electronic trading systems through a single or multi-bank dealing system. Finally, trades can be made through a voice broker, or over the phone with a foreign exchange broker. (Download my FREE Price Action Strategies http://bit.ly/mypriceaction ) #NMBO388

Spot Exchange Rate Transactions!!!

For most spot foreign exchange transactions, the settlement date is two business days after the transaction date. The most common exception to the rule is the U.S. dollar vs. the Canadian dollar, which settles on the next business day. Weekends and holidays mean that two business days is often far more than two calendar days, especially during the Christmas and Easter holiday season.

On the transaction date, the two parties involved in the transaction agree on the price, which is the number of units of currency A that will be exchanged for currency B. The parties also agree on the value of the transaction in both currencies and the settlement date. If both currencies are to be delivered, the parties also exchange bank information. Speculators often buy and sell multiple times for the same settlement date, in which case the transactions are netted and only the gain or loss is settled.

The Spot Market!!!

The foreign exchange spot market can be very volatile. In the short term, rates are often driven by news, speculation and technical trading. In the long term, rates are generally driven by a combination of national economic fundamentals and interest rate differentials. Central banks sometimes intervene to smooth the market, either by buying or selling the local currency or by adjusting interest rates. Countries with large foreign currency reserves are much better positioned to influence their domestic currency’s spot exchange rate.

How to Execute a Spot Exchange!!!

There are a number of different ways in which traders can execute a spot exchange, especially with the advent of online trading systems. The exchange can be made directly between two parties, eliminating the need for a third party. Electronic broking systems may also be used, where dealers can make their trades through an automated order matching system. Traders can also use electronic trading systems through a single or multi-bank dealing system. Finally, trades can be made through a voice broker, or over the phone with a foreign exchange broker.

(Download my FREE Price Action Strategies http://bit.ly/mypriceaction )
#NMBO388

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