There are several different markets within the Foreign Exchange system, and all of them are used to trade forex online. First, there is the spot market. The forex spot market is based on current values of currencies. A person can trade online a certain amount of currency with another trader in exchange for an equivalent amount of a different currency with immediate effect at the rates prevalent at the moment of transaction, as quoted in the forex ECN. The online transaction forms an agreement between the two traders to deliver currencies at specified exchange rates.  

Then things go differently depending on the purpose of the trade. There are two primary types of participants in Foreign Exchange, non-speculative and speculative.  If the currencies are bought for further use, for example, by an  importer who needs the currency to pay its foreign supplier, the transaction needs to be cleared, i.e. actual delivery of currencies must occur.  This normally takes two days, and the parties need to pay each other in full – there is no leverage.  Such trades are usually done through banks. Speculative trades, on the other hand, are done on margin via forex brokers, and delivery doesn’t happen.  The trader only needs to have a small percentage of the amount he or she trades, typically 1%, and the rest is “lent” to him by the broker.  This “loan”, which isn’t quite a real loan, although it carries a very real interest, is repaid when the trader closes the trade. The remainder of the proceeds from the trade is credited to the trader’s account, be it positive or negative.  Most of the offers to trade forex online are of this variety. 

Other two types of markets for currency exchange are forward and futures. In the forward market, the buyer and seller agree on an exchange rate of the transaction and a date is set for a specific time in the future, at which point the trade is executed despite what the then current exchange rates may be.  In the futures market, standard forex futures contracts are listed on the exchange, and the maturity date of the standard contract is fixed.  Forex futures are freely bought and sold until maturity date, at which point they expire and get settled. Forex futures are traded openly at commodity exchanges.  Forex forwards and futures also can be used to trade forex online, although one needs to qualify for access to those professional forex instruments.