|
Oct 28
|
There are several types of forex currency hedge funds. A Spot Forex currency hedge fund is not regulated by the SEC or the CFTC, and it offers investors a two day transaction time. A Forward Currency hedge fund is a fund where money is not traded until the specified future date has passed.
Other Types of Forex Currency Hedge Funds
Another popular forex currency hedge fund is the Swap Forex fund. Swap fund transactions are done between two parties that agree to trade two currencies with each other for a specific period of time. These currency transactions are not traded through an exchange, and standardized contracts are not used. Another basic forex hedge fund concept is the carry trade, which is one of the oldest strategies in finance. Carry trades occur when an investor borrows money in a currency with low interest rates, and invests it in another currency with high interest rates. Currency brokers realize that past trading patterns show that higher-yielding currencies maintain their exchange rate against lower-yielding currencies, and may even appreciate slightly, which allows the broker to pocket the difference in yields or what is known as the “carry.”
It is important to note forex currency trading is high risk investing. Before putting your money in any forex currency hedge funds, remember past performance is not and indicator of future performance.