What is spot market?

What is a Spot Market?

A spot market is any market that deals in the current price of a financial instrument.

Which Currencies Are Traded?

The most popular currencies along with their symbols are shown below:

Symbol Country Currency Nickname

USD United States Dollar Buck

EUR Euro members Euro Fiber

JPY Japan Yen Yen

GBP Great Britain Pound Cable

CHF Switzerland Franc Swissy

CAD Canada Dollar Loonie

AUD Australia Dollar Aussie

NZD New Zealand Dollar Kiwi

Forex currency symbols are always three letters, where the first two letters identify the

name of the country and the third letter identifies the name of that country’s currency.

When Can Currencies Be Traded?

The spot FX market is unique within the world markets. It’s like a Super Wal-Mart where

the market is open 24-hours a day. At any time, somewhere around the world a financial

center is open for business, and banks and other institutions exchange currencies every

hour of the day and night with generally only minor gaps on the weekend.

The foreign exchange markets follow the sun around the world, so you can trade late at

night (if you’re a vampire) or in the morning (if you’re an early bird). Keep in mind though,

the early bird doesn’t necessarily get the worm in this market - you might get the worm

but a bigger, nastier bird of prey can sneak up and eat you too…

Time Zone New York GMT

Tokyo Open 7:00 pm 0:00

Tokyo Close 4:00 am 9:00

London Open 3:00 am 8:00

London Close 12:00 pm 17:00

New York Open 8:00 am 13:00

New York Close 5:00 pm 22:00

The Forex market (OTC)

The Forex OTC market is by far the biggest and most popular financial market in the world,

traded globally by a large number of individuals and organizations. In the OTC market,

participants determine who they want to trade with depending on trading conditions,

attractiveness of prices and reputation of the trading counterpart.

The chart below shows global foreign exchange activity. The dollar is the most traded

currency, being on one side of 89% of all transactions. The Euro’s share is second at 37%,

while that of the yen is at 20%.

Why Trade Foreign Currencies?

There are many benefits and advantages to trading Forex. Here are just a few reasons why

so many people are choosing this market:

• No commissions.

No clearing fees, no exchange fees, no government fees, no brokerage fees.

Brokers are compensated for their services through something called the bid-ask

spread.

• No middlemen. Spot currency trading eliminates the middlemen, and allows you

to trade directly with the market responsible for the pricing on a particular

currency pair.

• No fixed lot size.

In the futures markets, lot or contract sizes are determined by the exchanges. A

standard-size contract for silver futures is 5000 ounces. In spot Forex, you

determine your own lot size. This allows traders to participate with accounts as

small as $250 (although we explain later why a $250 account is a bad idea).

• Low transaction costs.

The retail transaction cost (the bid/ask spread) is typically less than 0.1 percent

under normal market conditions. At larger dealers, the spread could be as low as

.07 percent. Of course this depends on your leverage and all will be explained

later.

• A 24-hour market.

There is no waiting for the opening bell - from Sunday evening to Friday afternoon

EST, the Forex market never sleeps. This is awesome for those who want to trade

on a part-time basis, because you can choose when you want to trade--morning,

noon or night.

• No one can corner the market.

The foreign exchange market is so huge and has so many participants that no

single entity (not even a central bank) can control the market price for an extended

period of time.

• Leverage.

In Forex trading, a small margin deposit can control a much larger total contract

value. Leverage gives the trader the ability to make nice profits, and at the same

time keep risk capital to a minimum. For example, Forex brokers offer 200 to 1

leverage, which means that a $50 dollar margin deposit would enable a trader to

buy or sell $10,000 worth of currencies. Similarly, with $500 dollars, one could

trade with $100,000 dollars and so on. But leverage is a double-edged sword.

Without proper risk management, this high degree of leverage can lead to large

losses as well as gains.

• High Liquidity.

Because the Forex Market is so enormous, it is also extremely liquid. This means

that under normal market conditions, with a click of a mouse you can

instantaneously buy and sell at will. You are never "stuck" in a trade. You can even

set your online trading platform to automatically close your position at your

desired profit level (a limit order), and/or close a trade if a trade is going against

you (a stop loss order).

• Free “Demo” Accounts, News, Charts, and Analysis. Most online Forex brokers

offer 'demo' accounts to practice trading, along with breaking Forex news and

charting services. All free! These are very valuable resources for “poor” and SMART

traders who would like to hone their trading skills with 'play' money before

opening a live trading account and risking real money.

• “Mini” and “Micro” Trading:

You would think that getting started as a currency trader would cost a ton of

money. The fact is, compared to trading stocks, options or futures, it doesn't.

Online Forex brokers offer "mini" and “micro” trading accounts, some with a

minimum account deposit of $300 or less. Now we're not saying you should open

an account with the bare minimum but it does makes Forex much more accessible

to the average (poorer) individual who doesn't have a lot of start-up trading capital.