What is an FX Spot Trade?

Basic Facts

Here’s our pick of the basic information you need to know:

• The Spot FX market operates 24 hours a day, 5 days a week
• The market opens on Sunday and closes on Friday, both at 5pm in New York
• Daily trading volume is in excess of $2 trillion
• Spot contracts the second most traded instrument type in the FX market
• Quotes are two-way, meaning the buy and sell prices are quoted at the same time
• The difference between the buy and sell prices is called the ‘spread’
• The Bid* price is the price to sell the base currency (e.g. to sell ‘GBP’ in GBPUSD)
• The Ask* price is the price to buy the base currency (AKA the ‘offer’)
• Prices are typically quoted to four decimal places
• The last two decimals are the points or ‘pips’, the first three are the ‘big figure’
• For example, for a price of 1.2512: ‘1.25’ is the big figure, and ’12’ is the pips
• Most spot trades settle on a T+2 basis, that is Trade Date + two days

*If you’re wondering why they’re called ‘bid’ and ‘offer/ask,’ it’s the prices that the bank/price-maker will bid for, or offer out, the base currency.

Need a hand?

FX can be complex and confusing, and we really don’t help matters with the language and terminology we use day-to-day in markets. Hopefully, this short article has given you what you need to know to understand What is an FX Spot Trade?

Want to learn more? treasuryXL expert Harry Mills can guide you with transparent currency risk management strategies and trading solutions. Get in touch with Harry now if you would like more information on the topic.

Thanks for reading!