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Trading in the stock market is associated with such concepts as spot, spot price, spot transaction, and others, which we will talk about in this article. Both newcomers to the exchange and experienced traders and investors should know about them. In simple terms, we will explain what spot is, how the spot market affects investment insecurities, and what are the nuances.
How Spot Trading Works
Here is a simple example of spot trading. Suppose you need to buy $4,000 on the foreign exchange market to purchase shares of foreign issuers. To do this, you need to open a brokerage account and replenish it with rubles. The next step is to submit a purchase order. It is allowed to set a specific price or buy at the best price on the market.
It is most profitable to conclude a deal with the fastest execution, i.e. in TOD (T+0) mode. Accordingly, the currency will be credited to the account instantly, and the contract price will be the lowest. Here’s what it looks like step by step:
- placing a buy order;
- conducting a transaction;
- delivery of a currency asset;
- using the currency for their own purposes.
It is also possible to reverse the financial transaction when we need to sell $4,000. To do this, you need to open a dollar brokerage account and replenish it with foreign currency. Most often, merchants prefer the TOM mode, because. SPT is characterized by low liquidity.
After placing an order and concluding a sell deal in T+1 mode, the contract value will be fixed. The next day, you will be able to withdraw Russian rubles.
At the same time, in currency transactions, it is allowed to set the mode and select TOD or TOM. So, when buying a currency, it is better to prefer TOD. If you are going to sell, then TOM will be more profitable. Within one dollar, the difference is imperceptible, however, when speculating in large lots, the income will increase significantly.
Expert opinion
The spot market is also called the platform for real transactions. You paid for the shares, and you get them right there. Accordingly, obligations are imposed on each of the parties to the transaction: the buyer must have the entire amount to pay immediately, and the seller must have the required amount of assets. This is the type of trading that most beginners start with.
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