Spot FX trading explained

What is spot FX?

Spot FX is the purchase or sale of forex ‘on the spot’, which means the exchange takes place at the exact point that the trade is settled. When trading spot forex, you buy and sell the currency pair at the current market rate, known as the spot price.

Forex trading is a way to speculate on international currencies without taking ownership of the physical assets. You can choose between spot currency trading and FX options. Many individuals prefer trading forex on the spot because it generally costs less to open a position due to narrower spreads, meaning it can be a more cost-effective way to take short-term positions on the underlying market.

Forex/currency spot essentials

Keep these three things in mind when it comes to spot forex trading:

You’re always trading a currency pair with CFDs on spot FX

When you trade spot FX, you are trading a currency pair. This means you are buying one currency (base currency) while selling another (quote currency) because you believe one of the currencies will strengthen against the other.

You can buy or sell CFDs on spot FX markets

Buying a spot FX market

You will buy the currency pair – go long – if you think the base currency will rise in value against the quote. For example, if GBP/EUR is trading at 1.1200, with a buy price of 1.1210 and a sell price of 1.1190, you would buy at 1.1210 because you think GBP will rise in value against EUR.

Selling a spot FX market

You will sell the currency pair – go short – if you think the quote currency will rise in value against the base. For example, if GBP/EUR is trading at 1.1200, with a buy price of 1.1210 and a sell price of 1.1190, you would sell at 1.1190 because you think EUR will rise in value against GBP.

You can speculate on currency markets with lower spreads

Spot forex trading is popular among day traders because spreads are generally lower than those available when trading FX forwards. However, overnight funding charges apply if you want to keep your position open until the next day.

How to trade spot currency and forex markets

Make sure spot FX is how you want to trade currency

Besides trading spot forex, you can also trade forex options. This table explains the difference between the two methods.

Learn more about spot CFD trading

Spot trading is trading a market at a spot price, which is what the asset is worth right now – or ‘on the spot’. Spot prices reflect the underlying market but with no fixed expiries, making them suitable for both beginners and experienced traders.

Pick the currency pair you want to trade

You can choose from over 80 currency pairs, including:

• Major currency pairs, eg GBP/USD, EUR/USD, and USD/JPY
• Minor pairs, eg USD/ZAR, SGB/JPY, CAD/CHF
• Emerging currency pairs, eg USD/CNH, EUR/RUB and AUD/CNH
• Exotic pairs, eg EUR/CZK, TRY/JPY, USD/MXN

Open a CFD trading account

You can trade spot FX with a CFD account. Both are derivative products, which means you only need a small deposit – called margin – to open a position.

Open and monitor your position

Once you’ve decided whether to buy or sell your chosen currency pair, you can monitor your position on our forex trading platform using the free tools and indicators available to you. Remember to stay abreast of any news and events that may affect the price of the FX pair you’re trading.