11/5/ · Types of Counter Trading Counter purchase. A counter purchase is a typical arrangement where the seller sells goods or services to a buyer. Barter. Barter is the What Are The Characteristics Of Counter Trade? Counter-trade agreements emphasize export sales to a specific market conditioned on that market accepting imports from that area. 17/10/ · Key Takeaways. A counter currency is the second or reference currency in a currency pair. The counter currency follows the base currency in ISO currency code pairs. 15/12/ · Unlike an exchange traded transaction, where the exchange is the trading counter-party, the brokerage firm or the bank that is enabling the trade becomes the counter-party. As 21/4/ · It is a form of swing trading that assumes a prevailing trend will see reversals and attempts to profit from them as the trend continues. Countertrend trading is generally a ... read more
Your Money. Personal Finance. Your Practice. Popular Courses. Table of Contents Expand. Table of Contents. What Is a Counter Currency? How Counter Currencies Work. Special Considerations. Example of a Counter Currency. Key Takeaways A counter currency is the second or reference currency in a currency pair.
The counter currency follows the base currency in ISO currency code pairs. Major currencies are more likely to be the base currency in a pair, especially when trading exotic currencies. Traders determine how many units of a counter currency they need to sell in order to purchase a single unit of the first or base currency.
In order to determine how many units of the counter currency you need to sell, multiply the total number of units in the base currency by the exchange rate. Article Sources. Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts.
We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy. Compare Accounts. Advertiser Disclosure ×. The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace. Related Terms.
Quote Currency A quote currency, commonly known as "counter currency," is the second currency in both a direct and indirect currency pair. Forex FX : How Trading in the Foreign Exchange Market Works The foreign exchange, or Forex, is a decentralized marketplace for the trading of the world's currencies.
Cable Cable is a term used among forex traders that refers to the exchange rate between the U. dollar USD and the British pound sterling GBP. What Is a Currency Pair? Major, Minor, and Exotic Examples A currency pair is the quotation of one currency against another. ISO Currency Code: Definition and List for Major Countries ISO currency codes are three-letter alphabetic codes that represent the various currencies used globally.
Base Currency: Definition, Example, Vs. Quote Currency The first currency quoted in a currency pair on forex. It is also typically considered the domestic currency or accounting currency. Under a counterpurchase arrangement , the exporter sells goods or services to an importer and agrees to also purchase other goods from the importer within a specified period.
Unlike bartering, exporters entering into a counterpurchase arrangement must use a trading firm to sell the goods they purchase and will not use the goods themselves.
In an offset arrangement, the seller assists in marketing products manufactured by the buying country or allows part of the exported product's assembly to be carried out by manufacturers in the buying country.
This practice is common in aerospace, defense and certain infrastructure industries. Offsetting is also more common for larger, more expensive items. An offset arrangement may also be referred to as industrial participation or industrial cooperation. A major benefit of countertrade is that it facilitates the conservation of foreign currency, which is a prime consideration for cash-strapped nations and provides an alternative to traditional financing that may not be available in developing nations.
Other benefits include lower unemployment, higher sales, better capacity utilization, and ease of entry into challenging markets. A major drawback of countertrade is that the value proposition may be uncertain, particularly in cases where the goods being exchanged have significant price volatility.
Other disadvantages of countertrade include complex negotiations, potentially higher costs and logistical issues. Additionally, how the activities interact with various trade policies can also be a point of concern for open-market operations. Opportunities for trade advancement, shifting terms, and conditions instituted by developing nations could lead to discrimination in the marketplace.
Financial Literacy. Company News Markets News Cryptocurrency News Personal Finance News Economic News Government News. Your Money. Personal Finance. Your Practice. Popular Courses. Guide to Forex Trading Advanced Concepts. What Is Countertrade? Key Takeaways Countertrade provides a mechanism for countries with limited access to liquid funds to exchange goods and services with other nations. A major benefit of countertrade is that it facilitates the conservation of foreign currency.
Common disadvantages of countertrade are complex negotiations, higher costs, and logistical issues. Compare Accounts. Advertiser Disclosure ×. The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.
Most of us trading in the forex market know that transactions happen over the counter, but generally we are so engrossed in getting our individual trade right that we have very little patience to understand the mechanics of the market and how trade happens in the Over the Counter format. You might be feeling how does it matter as long as my profits are in place?
Well, I would say that overlooking the inherent structure of any market might eat into your profits too. The structure of the forex market is a crucial element that can help you design your trading day and help you strategize better.
The way in which the currency pairs are traded in the forex market is the most important element that goes on to make the basics of the currency market globally. This is crucial as it has a direct bearing on the participants who get into this trade, the regulations governing them as well as the overall size of the forex market.
So what do you understand when it is said that price action in the forex market is conducted over the counter? I am sure all of you understand what over the counter drugs are. You can simply walk to the drug store, ask for these OTC medicines without any specific prescription or medical history.
The same theory applies here. Trading in the forex market is not channelized via any centralized exchange like you have in equity trade. All the different types of forex products that traders or investors trade in is always via market medium or a market maker. This is commonly a bank or a forex brokerage firm that helps in facilitating your desired trade and help you in buying and selling specific quotes from customers and taking orders from them.
Unlike an exchange traded transaction, where the exchange is the trading counter-party, the brokerage firm or the bank that is enabling the trade becomes the counter-party. As the market place is not regulated strictly by any single governing body, prices are market determined, and there is generally heavy competition and prices keep varying as per the market forces.
There is no standardized pricing, and the demand and supply dynamics keep on interfering with the live prices. Execution too varies as per demand. Well, this might be the first question that comes to your mind that while the stock markets function equally efficiently, they have set exchanges for conducting trade, be it the NYSE or the Nasdaq.
So how is this OTC trade different and why do you need such a decentralized system for the forex market? For that first and foremost, we must understand the dynamics of the forex market. It is a global forum providing trading platform to traders across the world in one go. Needless to mention then that the volumes and the liquidity levels in the forex market are huge compared to any equity market.
Now compare this to the combined volume of equity markets across the world. Thus, the essential construct of this market ensures that a more free flowing system with higher degree of efficiency is required. This is where the OTC trading concept comes to play. As trade is global, regulations of any specific country or any centralized authority does not dictate the dynamics of trade.
Unlike equity market, transaction cost is lower as this system has also alleviated the need for any fees for exchange and clearing. Trade as I mentioned is solely by the electronic medium hence the efficiencies are way higher despite a significantly lower cost. Another advantage of the forex market over stocks is the direct dealing between traders and the market makers like the banks.
There is absolutely no need for any middle man. Trade is also not time bound by any geographical or other limitation. The OTC spot forex market is a hour trading profit nearing machine. Traders can access the market anytime they want and tweak their trades in accordance to developing economic and geopolitical changes globally. Not just that you can execute your trade from the comfort of your bedroom.
Everything is via the electronic medium and a strong global trading network. So unlike a stock market trader, you do not have to give up everything to trade in the forex market. You can even double up as a stock market as well as a forex market player. In your free time or in between breaks from the stock markets, you could easily dabble in the Over The Counter forex market.
Speed is another hallmark of the Over The Counter Trade. While order submissions and order executions could be time-consuming, the OTC trade in forex market ensures that all transactions are quick, easy to execute and instantly applicable. Depending on the market condition you can exit and enter at will. Some of the key products used for trading via Over The Counter transaction in the forex market include:. There can be various other permutation and combinations of these while the actual trade is executed but essentially these constitute the primary ingredients of the OTC forex market broth.
Well, after the products, it is about the players. Right at the top we have the top money dealers including,. The next sub-group of the leading forex market players using the OTC channel includes both financial as well as retail participants. Even hedge funds, pension funds, MFs and other high networth investors have a significant stake in the final OTC forex market pie.
To draw to a close, the OTC forex market is expanding by leap sand bounds. The efficiency and the free flowing structure is what attract maximum traders to it. Must mention that ease of use is another big thumbs up. I don't believe in luck. I believe in sweat. The more you sweat, the luckier you get.
Skip to content Most of us trading in the forex market know that transactions happen over the counter, but generally we are so engrossed in getting our individual trade right that we have very little patience to understand the mechanics of the market and how trade happens in the Over the Counter format.
What Is Over The Counter Trading? Before you read the rest of this article, submit your email, not to miss the messages that nobody can afford to miss:. By The LuckScout Team I don't believe in luck. View all of The LuckScout Team 's posts. Notify of. new follow-up comments new replies to my comments. Inline Feedbacks. Manage consent.
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17/10/ · Key Takeaways. A counter currency is the second or reference currency in a currency pair. The counter currency follows the base currency in ISO currency code pairs. 11/5/ · Types of Counter Trading Counter purchase. A counter purchase is a typical arrangement where the seller sells goods or services to a buyer. Barter. Barter is the 15/12/ · Unlike an exchange traded transaction, where the exchange is the trading counter-party, the brokerage firm or the bank that is enabling the trade becomes the counter-party. As 21/4/ · It is a form of swing trading that assumes a prevailing trend will see reversals and attempts to profit from them as the trend continues. Countertrend trading is generally a A Counter Currency is the second listed currency in a currency pair, often referred to as the “Quote” currency. Dealing in currencies can be confusing at the start because you must What Are The Characteristics Of Counter Trade? Counter-trade agreements emphasize export sales to a specific market conditioned on that market accepting imports from that area. ... read more
An average of about one week would be an ideal trade duration for most traders who consider themselves contrarian swing traders. A Brief History of Forex. View all of The LuckScout Team 's posts. The cookie is used to store the user consent for the cookies in the category "Analytics". Below we have outlined some of the disadvantages of trading against the trend as a primary trade strategy. The more you sweat, the luckier you get.
Traders determine how many units of a counter currency they need to sell in order to purchase a single unit of the first or base currency. Currency Option: Definition, Types, Features and When to Exercise A contract that grants the holder the right, but not the obligation, to buy what is counter trading in forex sell currency at a specified exchange rate during a particular period of time. dollar is the most traded currency in the world. This is particularly true for mean reverting techniques, where even a minor miscalculation can lead to a losing result. Counter trading can be in various forms. Offsetting is also more common for larger, what is counter trading in forex, more expensive items.