Spot Trading Forex: Here’s The Details

　　The exchange rate determined in this transaction is called the spot exchange rate.

　　In general, the payment date of spot trading in the forex market is two business days after the trading date. However, the transaction between the U.S. dollar and the Canadian dollar will be settled one business day after the transaction date.

　　Spot trading is generally conducted in several ways, first of all, there is a method in which both parties directly trade without third party intervention. Not only that, there is another way that when an order is delivered to a foreign exchange broker by phone, the broker connects both sides of the transaction.

　　Currently, forex trading terminals of forex banks use an electronic broker platforms. The platform automatically finds a counterparty that meets the conditions when the user enters the order.

　　Finally, there is an electronic transaction system, which is mostly owned by certain banks or financial companies and is mainly used for customer transactions rather than forex transactions between banks.

　　The exchange rate between the two currencies is often referred to as the “in-kind” exchange rate. More specifically, spot trading are related to the sale or purchase of currencies. In essence, forex in kind is selling and buying foreign currency.

　　A good example of this is when you buy a certain amount of South African rand (ZAR) and exchange it for US dollars (USD). If the value of the ZAR increases, the USD can be replaced with the ZAR again. In other words, you can get more money back than the original amount you paid.