Thursday, March 5, 2009

Nature Of The Forex Spot Market

The Immediate Nature Of The Forex Spot Market

Often times peoples ideas about the financial markets can result in their frustration if and when they decide to make the leap and test the waters of a particular trading market. Many people find it a little surprising that stock trades that they wish to make are not immediate, as they had once thought it was. Immediate trades are not unheard of, however, a standard stock market will typically not offer a trader such fast responses to trade requests. This sort of immediate reaction is normally the preview of a spot market. While certain securities and commodities are trades on a spot market the most popular of all spot markets is the Forex Spot Market. The question many have is, what a spot market is. The actual definition of a spot market is a market where a commodity, or cash, is bought and sold immediately. As with the stock market, you may want to buy or sell a particular stock, once you have put in the order with you brokerage firm, there is a certain amount of time that it takes to execute the buy or sell transaction. During this time, the value of the stock could rise or fall and these movements could dramatically affect the profitability of your transaction. A Forex Spot Market is a horse of a different color. Calling Forex a Spot Market is somewhat misleading simply because that is the only market type that currency is traded on. This means that if you see a potential profit in a currency pairing and you want to get in on it before things change, all you need to do is purchase the pairing. Upon you submitting the order, your transaction will be immediately executed. Conversely if your trade is going south in a hurry, you can end the trade as quickly as you made it, thus minimizing your losses. One reason why the Forex Spot Market is traded with such speed can be attributed to the fact that Forex trades are done electronically. This is both convenient and necessary. Convenient, because you can make trades on your computer virtually anywhere and at any time, day or night, necessary, because the Forex Market has no central trading floor to speak of. It is a 24-hour a day market. Regardless of why the Forex Spot Market is the way it is, the immediate nature of this particular market is what makes it so appealing and so very popular.

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