Delivery

In the context of Forex trading, “delivery” refers to the physical exchange of one currency for another. It is a term primarily used in the futures market, where contracts are settled by delivering the underlying asset (in this case, currencies) on a specified future date.

In Forex, most transactions are conducted on a spot basis, which means that the settlement occurs immediately or within a short period. Therefore, physical delivery is not commonly practiced in the spot Forex market. Instead, traders usually engage in cash settlement, where the profit or loss from a trade is settled in cash without the need for physical delivery of the currencies.

However, in certain cases, such as trading currency futures or options, delivery may be a part of the transaction. For instance, if a trader buys a currency futures contract, they may have the obligation to take delivery of the underlying currency at the contract’s expiration date. Similarly, in options trading, exercising the option may involve the physical delivery of the currency.

It’s important to note that most retail Forex traders do not engage in physical delivery. The majority of Forex trading is speculative in nature, focused on profiting from price fluctuations rather than actually taking possession of the currencies being traded. Therefore, delivery is not a common concept in the spot Forex market for retail traders.

In summary, delivery in Forex refers to the physical exchange of currencies, typically associated with futures or options trading. However, for retail traders in the spot Forex market, cash settlement is the norm, where profits or losses are settled in cash without the need for physical delivery.