Spot Forex Trading

The Forex platform can be confusing at first for many new investors and traders. Currency trading consists of more than one factor. Spot, futures and options all play key roles to the investor when trading currencies. Each one of these factors are different from the other but they all tie in together to represent the value of any currency. Most new investors do not realize this and miss out on many opportunities that present themselves every day in the markets. Spot Forex trading and futures trading are not necessarily exactly the same. It’s important to take note of the slight differences found between these two.

Many professional currency traders actually prefer spot Forex trading over future trading for a number of reasons. Spot trading can immediately affect the price of trading that investors should be aware of. Spot trading consists of purchasing trades on the spot with cash. These types of trades are known as the physical market. It only takes a few days for spot trading to be settled whereas futures trading can take up to a few months. The responsiveness of spot trading presents more opportunities for growth to the investor. Certain events in the world that can have a direct effect on prices are available to be taken advantage of by means of spot trading. The ability to react to these changes in only a matter of a few days can dictate whether or not the investor can benefit from it.

Futures trading do not allow the investor to complete a transaction as fast as spot trading. This means that investors who trade futures might end up missing out on certain opportunities in the market. The ever popular term “strike while the iron is hot” is best represented by spot trading. In fact, 40% of all Forex trades are completed within 2 days. 80% of all Forex trades are completed within 2 weeks. This goes to show just how many investors who invest in the Forex markets are trading at spot trade.

Spot Forex trading first arrived on the scene to make it easier for banks to deal with bigger corporations. Quick transactions created more opportunities for growth and spot trading met those demands. Today, spot Forex trading isn’t just used by banks anymore. Even the smaller investor has access to spot Forex trading and it is practiced every day by both experienced investors and new investors alike. Retail investors are also using spot Forex trading as well.

The National Futures Association (FSA) imposes fees on trading transactions. Many investors will mistake spot Forex trading as having lower fees. However, this is not the case as the transaction costs are incorporated in the overall price of the market spread. Investors see the overall fees that are associated with spot Forex trading as being lower but in reality the money being saved is added to the market spread over time. This nullifies the so called lower fees of spot Forex trading. Another benefit to spot Forex trading is the ability to invest in smaller amounts. Normal futures trading involve big amounts of investments when compared to spot Forex trading.

Since spot Forex trading involves smaller amounts of investing, new investors are drawn to spot trading before they tackle futures trading later on. There are fewer risks involved with spot trading as well that many new investors are attracted to. The Forex trading platform is a powerful tool when it comes to currency trading. Incorporating spot Forex trading strategies amplifies the power of this ever popular trading tool that many investors use every day. Investors are encouraged to fully understand how spot Forex trading works before they dive in and become successful with Forex.

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