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Spot Trading

Spot trading refers to the buying or selling of financial instruments, commodities, or currencies for immediate delivery and settlement. Spot trades are executed at the current market price, known as the spot price, with settlement typically occurring within two business days. Spot trading contrasts with futures trading, where the settlement is scheduled for a future date.

Example

A trader in the commodities market engages in spot trading by purchasing crude oil at the current market price for immediate delivery.

Key points

• Involves the immediate buying or selling of assets.

• Executed at the spot price, with settlement in one or two business days.

• Common in forex and commodities markets.

Quick Answers to Curious Questions

It allows traders to take advantage of immediate price movements and market conditions without waiting for future settlement dates.

Spot trading settles immediately (typically within two days), while futures trading involves agreements to buy or sell at a later date.

Prices can change rapidly, leading to significant short-term gains or losses based on immediate market conditions.

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