Everything You Need to Know About Spot Trading
Spot trading is a versatile option whether you’re interested in commodities, forex, or cryptocurrencies. Discover how to engage in spot trading effectively.
Maximum leverage 1:500
99.35% of orders achieve ultra-fast execution < 13ms
T+0 Speed Withdrawal
Tradable financial products 100+
What is Spot Trading?
Spot trading involves transactions that occur 'on the spot,' meaning they are executed almost immediately. The 'spot price' is the current market value of an asset and is assessed in real-time.
For example, if 1 US Dollar is currently worth 1.491 Australian Dollars, this is the spot price for USD/AUD in the currency market.
Spot trading is favored by investors for its ability to open short-term positions with low spreads and no expiry date.
How Does Spot Trading Work?
Spot trading operates on a straightforward principle:
You open a position at the current value and close it at a new value. If this value moves in your predicted direction, you earn a profit.
If demand outstrips supply, the spot price rises. Conversely, if demand falls while supply remains high, the spot price drops.
Many markets allow you to go long (buy) or short (sell) on a position. In forex, for instance, you can open a selling position to profit from a declining spot price.
Spot Trading with CFDs
Traders can also engage in spot trading using contracts for difference (CFDs). CFDs are derivatives that track the value of an asset without requiring ownership of the asset itself.
Spot trading with CFDs provides the benefit of real-time pricing and the ability to use leverage to enhance market exposure.
Spot Trading Across Different Markets
Any asset with a measurable current value can be spot traded. Common markets for spot trading include:
Commodities Markets
Such as oil and precious metals, with spot gold trading being particularly popular.
Stock and Share Indices
These feature current spot values that fluctuate over time.
Crypto and Forex
Two of the most widely used markets for spot trading.
Spot Trading in Crypto
Spot trading in cryptocurrency operates similarly to other forms of spot trading. Sellers make offers and set a sell price, while buyers place orders at specific bid or purchase prices. With CFDs, you buy a crypto asset, speculate on its price movements, and monitor the trade's progress over time.
The primary distinction in crypto spot trading is the market's high volatility, which can lead to substantial profits if managed with a sound strategy.
Spot Trading in Forex
Forex trading involves currencies that constantly fluctuate in price, making them an appealing option for those exploring diverse trading opportunities.
Although forex futures, options, and forwards differ from spot trades, they are closely related since all these derivatives depend on current and future spot forex trading rates.
