Difference between Spot and Futures Forex Trading

Spot trading and futures trading are the most important forex trading types. They are virtually opposite to one another. Spot forex trading is the ‘on the spot’ trading and futures forex trading is the contract for trading the currency in somewhere near future. In simple, spot trades are done for actual currency deliveries usually with in two days and futures traders are done for a delivery/purchase usually after 3 months.

Spot forex trading, also known as cash trading, is done against the market volatility to make profit. On the other hand futures forex trading is done for hedging market volatility to cover the loss. Spot trades usually have penalties on failing the delivery on time. Although spot trades have a two day delivery date, by closing and opening the spot positions repeatedly, one can increase the delivery date, almost to infinity.

Futures forex trades are credited with interest, where interest for spot trading depends on the opening and closing time interval; if less than one day (mostly for forex day traders) no interest. At last remember the future contracts which expire within 30 days are also known as sport contracts, because of the nearness of the delivery time.

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