What Is a Spot Market?

A spot market is any market that deals in the current price of a financial instrument. Futures markets, such as the Chicago Board of Trade, offer commodity contracts whose delivery date may span several months into the future. Settlement of FOREX spot transactions usually occurs within two business days. There are also futures and forwards in FOREX, but the overwhelming majority of traders use the spot market. Thanks to the ability to automatically roll over from one trading session to the next, spot FOREX traders may hold a position for as long as they like.

In addition to spot, forward, and futures, options trading in FOREX has become very popular at the retail level.
You may also participate in the spot market with spread betting. These all have both advantages and disadvantages, which is discussed in Five FOREX Markets.
By Michael Duane Archer
Michael Duane Archer has been an active futures and FOREX trader for more than 35 years. He has worked in various advisory capacities, notably as a commodity trading advisor, registered SEC investment advisor, and branch manager for Heinold of Hawaii. He currently trades FOREX and futures and is involved in several technical analysis research projects.

Copyrighted 2016. Content published with author's permission.

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