Forex: Instruments

Financial Instruments
Spot (Single Payment Option Transaction)

A Spot transaction is a direct exchange between two currencies. Based on volume, Spots are the most widely used financial instrument in the Forex market. Along with the timeframe of the transaction, two other benefits of Spot transactions are: there is no interest used in the transaction, and it is a cash transaction without the need for a contract.

Forward

This transaction locks in the price at which an investor can buy or sell a currency on a future date. In a forward contract, the contract holders are required to buy or sell the currency at a specified price, at a specified quantity and on a specified future date. Future
Futures are forward transactions with a specified period of delivery and contract size. The average term of a Futures contract is 3 months. Futures are standardized, include an interest amount, and are traded on an exchange.

Currency Swap
A Currency Swap is the exchange of principal and interest in one currency for the same in another currency. It is the most widespread type of forward transaction. I contrast to futures contracts, currency swaps are not standardized and not traded on an exchange.

Exchange Traded Fund

An ETF is a security that tracks an index, like the S&P 500 and the stock market, but trades like a stock on an exchange.