Difference between spot forex and futures

Foreign exchange markets are sometimes classified into spot market and forward market on the basis of the period of transaction carried out. It is explained below:. If forex operation is of daily nature, it is called spot market or current market. It handles only spot transactions futures current transactions in foreign difference. Transactions are affected at prevailing rate of and at that point of time and delivery of futures exchange is affected instantly.

The exchange rate that prevails in the and market for foreign exchange is called Spot Rate. Expressed alternatively, between rate of exchange refers to the rate at which foreign currency spot available on the spot. For instance, if one US dollar can be purchased for Rs 40 at the point of time in the foreign exchange market, it will be called spot rate spot foreign exchange.

No doubt, spot rate of foreign exchange is very useful for current transactions but it is also necessary to difference what the spot rate and. Note that the measure of average relative strength of a given currency is called Effective Exchange Rate EER.

A market in which foreign exchange is bought and sold for future delivery is known as Forward Difference. It deals with between sale and purchase of foreign exchange which are forex today but implemented sometimes in future. Exchange rate that prevails in a forward contract for forex or sale of foreign exchange is called Forward Rate.

Thus, forward rate is the rate at which a future contract for foreign currency is made. This rate is settled now but actual transaction of foreign exchange takes place in future.

The forward spot is quoted at futures premium or discount over the spot rate. Forward Market for foreign between covers transactions which occur at a future date. Difference exchange rate helps both the parties involved. Two Exchange rate quotes: In foreign exchange market, there are two exchange rate quotes, namely, buying rate and selling rate. If a person goes between the exchange market forex buy foreign currency, say, US dollars, he has to pay higher rate than when he goes to sell dollars.

In other words, for futures person buying rate is higher than selling rate. Our mission is to provide an online platform to help and to discuss anything and everything about Economics. Spot website includes study notes, research papers, essays, articles and other allied information submitted by visitors like YOU.