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What is spot and forward trading in Forex?

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answered Apr 14, 2017 by asha (1,990 points)

When trading Forex, investors are quoted a spot price. This means that if no further steps are taken, the trade will mature and be settled after two business days. If required, however, the spot trade will be automatically swapped forward with the prevailing rate for maturity the next business day, every trading day, until the position is closed. This can be undertaken on a daily basis or for a longer period.

Investors may also swap their trades forward from a few days up to several months depending on the time frame of their chosen investment strategy. Although a forward trade is for a future date, the position can be closed out at any time. The closing part of the position is then swapped forward to the same future value date.

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