What is Forex Spot Trading?
Forex spot trading has nothing to do with getting everyone together in the same spot and trading coins, I can assure you. I found out the hard way and was laughed out of the circle of financial gurus. True story. Ok, not really, but if you don't understand what the spot trade is after this article, you could at some point be laughed at at the local Forex roundtable.
What Are the Different Ways to Trade Forex?
When talking about the
, many people do not realize that there are actually multiple ways to trade currencies. Although they all involve changing one currency for another, the actual steps involved are quite different.
One method that can be used to trade Forex is with futures contracts. With this method, you come to an agreement with another trader on what the price of a currency pair will be at some point in the future. You do not actually fill the contract at the beginning. This gives speculators a chance to speculate. After all, playas gotta play, right?
Another method you have when it comes to Forex is trading
. Options are a type of contract that give you the opportunity to buy a currency at a certain price on some specific date in the future. The difference is that you can simply choose not to exercise the option and let it expire if you want. But we've all had a gift certificate to a local restaurant expire worthless before and that just sucks.
The third way, which is what this article is actually about (took me long enough, huh?), is with a spot trade. This is what the vast majority of retail traders do in the Forex market. This type of trade involves coming to an agreement on the price of a currency pair and then settling that trade right away.
How it Works
When you open an account with a Forex broker and start trading, you are essentially buying and selling currencies. You are not entering into contracts to potentially buy or sell at some point in the future. You're actually throwing the currency pairs in your shopping cart, checking out at the register and taking them home. You know...minus the shopping cart, register and home part. But you take care of everything right then and there. This is the essence of the Forex spot trade.
When you look at Forex rates from your broker, you are looking at what the broker will actually sell or buy a currency pair for at that moment.
If you've come this far, you might be interested in getting started with this mythical spot trading market. That's completely normal and awesome, I might add. If that's the case, you'll want to check out our
Forex trading guide
to see what the basic steps are. Then when you see what's involved, feel free to find a trading strategy with our reviews and check out brokers here also. It's basically your one stop shop for all things Forex. Except the psychiatric counseling involved when you blow up an account because you didn't stick to your trading strategy. That's on you.
If you enjoyed this article about Forex spot trading, please share it with your friends by using the social networking buttons at the bottom of the page. As always, thanks for stopping by FTR!
Return From Forex Spot Trading to Forex Trading Systems
Return From Forex Spot Trading to Forex Trading