In the world of foreign exchange trading, there are many new terms that traders may only hear once. Thus, many traders who do not understand the world of foreign exchange well. Understanding the spot market will make you go one step to becoming a successful trader. Here is why
What is Spot Market?
A spot market is a place where financial instruments, such as commodities, currencies, and securities, that you can trade for immediate delivery. Transfers are cash exchanges for financial instruments. Futures contracts, on the other hand, are based on the delivery of basic assets in the future.
Exchange and over-the-counter (OTC) markets can provide spot trading and/or futures trading.
Understanding Spot Market
Spot markets are also referred to as “physical markets” or “cash markets” because direct trade is effectively exchanged for assets. While the official transfer of funds between buyers and sellers may take time, such as T+2 on the stock market and in most currency transactions, both parties agree to trade now. Non-spot transactions, or futures, agree on the current price, but the transfer and transfer of funds will be done at a later date.
Futures trading in expiring contracts is also sometimes called spot trading because the contract expires means that the buyer and seller will exchange cash for the underlying asset immediately.
Spot and Exchange markets
Exchange brings dealers and traders who buy and sell commodities, securities, futures, options, and other financial instruments. Based on all orders given by participants, the exchange provides the price an!d volume currently available to traders with access to the exchange.
The New York Stock Exchange (NYSE) is an example of an exchange where traders buy and sell shares. This is a spot market.
Chicago Mercantile Exchange (CME) is an example of an exchange where traders buy and sell futures contracts. This is a futures market.
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