Spot FX trading explained
Trading forex on the spot is a popular choice for many financial traders. Find out how you can trade spot FX and how it differs from forex options and forwards.
Start trading today. Call 0800 195 3100 or email newaccountenquiries.uk@ig.com. We’re available from 9am to 5pm (UK time), Monday to Friday.
Contact us: 0800 195 3100
Start trading today. Call 0800 195 3100 or email newaccountenquiries.uk@ig.com. We’re available from 9am to 5pm (UK time), Monday to Friday.
Contact us: 0800 195 3100
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, FX options or FX forwards. 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 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 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 forwards or options. Plus, we’re one of the few UK providers to offer forex trading on Saturday and Sunday with our Weekend GBP/USD, Weekend EUR/USD and Weekend USD/JPY offerings.
| Spot forex | Forex forwards | Forex options | |
| How it's priced | ‘On the spot’, with continuous, real-time pricing | Based on spot price | Based on spot price |
| Weekday trading hours | 9pm Sunday to 10.15pm Friday (UK time) | 9pm Sunday to 10.15pm Friday (UK time) | 9pm Sunday to 10.15pm Friday (UK time) Break from 8-9pm for daily options |
| Weekend trading hours | 8am Saturday to 8.40pm Sunday (UK time) on GBP/USD, EUR/USD and USD/JPY | Not available | Not available |
| How many pairs can I trade? | 80+ | 33 | 9 |
| Costs and charges | Narrower spread but with overnight funding charges | Larger spread but no overnight funding charges | Higher premium but no overnight funding charges |
| Risk to capital | You could lose more than your deposit (margin) | You could lose more than your deposit (margin) | Limited to premium if you buy put or call, could lose more than premium if you sell |
| Expiry | No | Yes | Yes |
Learn more about spot 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 trading account
You can trade spot FX with a spread betting or 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.
Develop your forex knowledge with IG
Find out more about forex trading and test yourself with IG Academy’s range of online courses.
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