Forex Spot Trading

Forex spot trading is the trading of currency pairs for immediate delivery.

When you trade currencies (forex or foreign exchange) you are always dealing in two currencies. That is you may be selling US Dollars and buying British Pounds. Or perhaps you are buying Japanese Yen and selling Euros. The important thing to remember is that it always takes a pair of currencies to make a deal. And most deals are for immediate delivery so you are therefore forex spot trading whether you realize it or not.

For example, let’s say that you are an American vacationing in London and of course you need British Pounds to pay for your purchases there rather than US dollars. So you will be selling US dollars to buy British Pounds.

These days you would probably head for an ATM machine, insert your debit or credit card that is attached to your American bank account, and let’s say withdraw 200 British pounds. Like a modern day miracle 200 Pounds are dispensed by the ATM machine. Your account in the United States is immediately charged the US dollar equivalent of British Pounds. If the exchange rate is 2.0600 your American account is charged 200 x 2.060 = $412.00.

Congratulations. You have just engaged in forex spot trading.

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