Spot Forex Trading

Written by Patricia Tunstall
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The spot forex trading market is unique in the financial world. It is the largest market, with a daily volume of $1.5 trillion. Buying and selling are nearly instantaneous because of electronic transactions. It is open for business 24 hours a day, from Sunday evening until Friday afternoon.

Unlike the stock market, for instance, the spot forex trading forum is unregulated. Firms that offer services to the retail (general) public in this off-exchange market are under the authority of the Commodity Futures Trading Commission (CFTC). However, the worldwide forex trading market itself is unrestricted. No government can intervene unilaterally in the currency trading marketplace. The foreign currency trading forum developed after the United States went off the gold standard in 1971, and the market sustains itself only because there continues to be willing buyers and sellers.

Electronic Transactions in Spot Forex Trading

The bottom line here is price. The spot market in foreign currency is cash transactions only via phone, computer, or Reuters. An investor's funds are, therefore, always liquid. The buyer-seller agreements can be lightning-fast. Risks are high, and profits and losses can be significant.

All the more reason that firms which manage these accounts caution that only sophisticated, experienced investors should become involved in this market. For instance, it takes a savvy investor to fully comprehend and appreciate the perils of trading on margin, especially in the spot market. Any potential investor should be aware that funds placed in spot forex trading accounts are not insured by the Federal Deposit Insurance Corporation (FDIC), or any other government entity.

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