Can someone please explain what a contract is...
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Thread: Can someone please explain what a contract is...

  1. #1
    I subscribe to Investica and they will say, from time to time, there are 18,000 long contracts on the Euro or 26,000 contracts, or whatever it might be.

    What is a contract? Is there a specific quantity of money connected to 1 contract- such as one contract equals $100,000? Are contracts related to market makers or does it comprise the retail traders like people? Can be a contract on a particular currency rather than a currency pair?

    Let's state that Investica says that there are estimated to be 26,000 long contracts on the Euro. They will then state that with this many long contracts out there, the Euro will fight to make headway. Why would a large number of contracts in favor of the currency actually interfere with it?

    Thank you for any insight anyone can offer

  2. #2
    It is a Derivative said as with Open Interest as a step of current market anticipation of a future price level.

    They Ought to be saying it as Open Interest and not Contracts. But, the same as the early days of the PC business, the retail side of the Forex business isn't fully compatiable, yet.

    We're working on it. Standards can sometimes slow in forthcoming.

    Eventually, everybody will be speaking the same language. Like PCI, USB, AGP, or DDO now for PC's. (or, was that yesterday)

  3. #3
    I think they're speaking about future contracts. . .The total number of contracts open is called the open interest, that's the amount of currently open contracts by traders and investors...I do not know the specs of this currency future contracts, however you can check this via the site of the exchange where the contract has been traded...

    26,000 contracts open for the EUR/USD usually means that there's 26,000 open contracts to buy a specific amount of Euros from the USD at a certain delivery date....Of course, for every long contract, there's a similar brief contract standing, for the guys who are long the contracts have bought those contracts from some other guys who are short the contracts. .

    It's not important how many contracts are open (despite the fact that it is significant), but what is more important, how much new contracts were opened recently. . .For example, if today the open interest for your EUR/USD has been 12,000 contracts, and elsewhere 10,000 new contracts were opened, this means that we stand today at 22,000 contracts....In conjunction with all the cash market price of their underlying, That's the EUR/USD, this gives a significant management to the future of this inherent pair...

    Hope that I have been of any assistance


    Due,

    Nader

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