Spot Trade Definition. A Spot Trade in Forex is a purchase or sale of a foreign currency in the Spot Market at the Spot Rate for immediate delivery or delivery “on the spot”, as opposed to a date in the future. Spot contracts are typically cleared and settled electronically. A Spot Trade in foreign currencies is typically transacted with a “2-day value date”, an international convention due to time zone differences and the need for banks to communicate cross-border to perform the transaction. Occasionally a “1-day value date” can be achieved when the complete trade is near or within the same time zone, as with USD trades for the Canadian Dollar of the Mexican Peso. If a position is left open overnight, a forex broker will typically rest the value date two business days out by closing and reopening the position at the same price, thereby preventing the actual delivery of currency to take place. The Spot Market accounts for nearly 35% of the total volume exchanged on the foreign exchange market.
Risk Statement: Trading Foreign Exchange on margin carries a high level of risk and may not be suitable for all investors. The possibility exists that you could lose more than your initial deposit. The high degree of leverage can work against you as well as for you.