What is spot trading? How to trade spot markets in the UK
Spot trading takes place across a wide range of markets, including foreign exchange, commodities, equities and cryptocurrencies, and forms the foundation of global financial activity. This guide explains how spot trading works, how spot prices are determined, how it compares to other trading methods, and how you can trade spot markets with us.
What is spot trading?
Spot trading refers to any transaction in which a financial asset is bought or sold at the prevailing market price, with settlement taking place immediately or within a very short timeframe. The word 'spot' comes from the phrase 'on the spot', reflecting the near-immediate nature of the transaction. The agreed price in a spot trade is known as the spot price or cash price.
In practice, most spot transactions in the foreign exchange market settle on a T+2 basis, meaning the actual exchange of currencies takes place two business days after the trade is agreed. This is a settlement convention rather than a reflection of delayed execution.
In some markets, such as equity markets, settlement can also be T+1 or T+2 depending on jurisdiction and exchange rules. The key distinction from a futures contract is that spot trades reference the current price, not a price agreed today for delivery months into the future.
Quick fact
The global foreign exchange market recorded a record average daily turnover of $9.6 trillion in April 2025, up 28% from $7.5 trillion in the 2022 survey. A significant driver was the sharp fall in the US dollar following the announcement of US tariffs in April 2025, which prompted a major repositioning of global currency exposures. The UK remains the world's largest FX trading centre, accounting for approximately 38% of all global FX activity.
How is the spot price determined?
The spot price of any asset is determined by supply and demand in the market at that moment. Buyers and sellers interact, either directly through an exchange or over-the-counter (OTC), and the price at which they agree to transact becomes the spot price. Several factors influence where the spot price sits at any given time:
Market |
Key spot price drivers |
Forex |
Interest rate differentials, inflation, trade balances, central bank policy, geopolitical events and market sentiment |
Commodities |
Physical supply and demand, inventory levels, weather, geopolitics, currency movements and production costs |
Equities |
Company earnings, economic data, sector sentiment, interest rates and index rebalancing flows |
Cryptocurrencies |
Exchange order flow, regulatory news, macroeconomic sentiment, network activity and liquidity conditions |
In liquid markets such as major currency pairs or FTSE 100 shares, the bid-offer spread is tight and spot prices update continuously during trading hours. In less liquid markets, spreads widen and prices can be more volatile. The spot price is always a live, tradeable price, unlike a theoretical or indicative price.
Spot trading vs futures and forwards
Spot trading is often contrasted with futures and forward contracts, which involve agreeing on a price today for delivery or settlement at a specified future date. The differences matter for how traders and investors approach different markets:
Feature |
Spot |
Futures |
Forwards |
Settlement |
Immediate (T+2 for most markets) |
Specified future date (e.g. quarterly expiry) |
Specified future date (agreed between parties) |
Price |
Current market price |
Agreed today for future delivery |
Agreed today for future delivery |
Traded where |
OTC or exchange |
Exchange (standardised) |
OTC (customised) |
Leverage |
Usually none (unless CFD/spread bet) |
Yes, via margin |
Usually none (institutional) |
Common use |
Immediate exposure, day trading |
Hedging, speculation, price discovery |
Hedging, corporate FX management |
For most retail traders, the most accessible form of spot trading is through contracts for difference (CFDs) or spread bets, which allow you to speculate on the spot price movement of an asset without taking physical delivery or exchanging the underlying asset. These instruments use the spot price as their reference, and positions are held at the current market rate with overnight funding costs applied if positions are held beyond the market close.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 68% of retail investor accounts lose money when trading spread bets and CFDs with IG, therefore you should understand if you can afford the high risk of losing your money.
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Which spot markets can you trade?
Spot trading is available across a wide range of asset classes. The most commonly traded spot markets include:
Spot forex
The foreign exchange spot market is the largest financial market in the world. With average daily trading volume of $2.96 trillion in spot transactions alone, according to the BIS 2025 Triennial Survey, it dwarfs the equity markets by volume. Major currency pairs such as EUR/USD, GBP/USD and USD/JPY account for the largest share of activity. Spot forex trades at current exchange rates and settles in T+2, though retail traders using CFDs or spread bets never take delivery of the underlying currency. The US dollar remains a component of approximately 88% of all global FX transactions.
Spot commodities
In commodities markets, the spot price refers to the price of the physical commodity for immediate delivery. Gold, silver, crude oil and natural gas all have active spot markets. The spot price of gold, for example, is the price per troy ounce for immediate settlement in the London or New York markets. Retail traders typically access commodity spot prices through CFDs or spread bets rather than trading the physical market, which requires warehousing and logistics.
Spot indices
While stock indices are technically derived from their constituent shares rather than traded directly as a single asset, retail traders frequently refer to 'spot' index trading when taking positions at the current cash price of an index such as the FTSE 100 or S&P 500. This distinguishes it from trading index futures, which are priced at a premium or discount to the spot level depending on interest rates and dividends.
Spot crypto
Cryptocurrency spot markets allow traders to buy and sell digital assets at current market prices on exchanges. Unlike crypto derivatives, a spot crypto purchase means the buyer actually receives the digital asset. Retail access through IG uses CFDs, meaning traders speculate on price movements rather than holding the underlying cryptocurrency.
Spot price vs futures price: contango and backwardation
The relationship between the spot price and the futures price of a commodity or asset is an important concept for traders who hold positions over time. When the futures price is higher than the spot price, the market is said to be in contango. When the futures price is lower than the spot price, it is in backwardation. Backwardation often implies economic stress, but it can be a positive as this can incentivise increased supply.
Term |
Definition |
When it typically occurs |
Effect on rolling positions |
Contango |
Futures price above spot price |
Most commodity markets; reflects storage, insurance and financing costs |
Rolling costs money as you sell lower and buy higher |
Backwardation |
Futures price below spot price |
Supply crunches; strong near-term demand |
Rolling generates a benefit as you sell higher and buy lower |
For traders and investors using leveraged products that reference spot prices, these dynamics are less directly relevant. However, they become significant when trading commodity ETPs or futures-based products that require regular rolling of contracts. Understanding the spread between spot and futures prices helps traders anticipate costs in these instruments. Our guide on exchange-traded products covers how commodity ETPs handle this rolling mechanism in practice.
Quick fact
London's dominance as the world's leading spot FX trading centre has been consistent across every BIS Triennial Survey since 1986. The UK accounts for approximately 38% of global FX daily turnover, ahead of the US (19%) and Singapore (9%). The Bank of England publishes its own analysis of the BIS data for UK-specific results.
Source: bankofengland.co.uk
How does spot trading work with IG?
With us, you can trade spot prices across forex, commodities, indices, shares and cryptocurrencies using spread bets and CFDs. Here is how the process works:
1. You select the market you want to trade, for example EUR/USD or gold, and choose a position size.
2. You take a long position (buy) if you expect the spot price to rise, or a short position (sell) if you expect it to fall.
3. Your profit or loss is determined by the difference between the price when you open the position and the price when you close it, multiplied by your position size.
4. For positions held overnight, a small funding cost (overnight financing charge) is applied. This reflects the cost of maintaining a leveraged position beyond the end of the trading day.
5. You can manage risk using stop-loss orders, which automatically close your position if the market moves against you by a specified amount.
Spread bets and CFDs on spot prices are leveraged products, meaning you only need to deposit a fraction of the full trade value as margin. While this can amplify profits, it also means losses can exceed your initial deposit. We also offer share dealing and ISA accounts for investors who want direct ownership of shares, where the execution price is also referenced to the spot price.
For fund-based exposure to multiple markets, UK ETFs and global ETFs offer diversified spot market exposure in a single trade. Our guide to index funds vs ETFs explains the key structural differences between these.
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Advantages and risks of spot trading
Advantages |
Risks |
Simplicity: spot prices are straightforward to understand and track |
Leverage amplifies losses as well as gains: losses can exceed your initial deposit |
High liquidity in major markets, particularly forex and blue-chip equities |
Overnight financing costs can erode profits on positions held for extended periods |
Transparent pricing based on live supply and demand |
High volatility in some spot markets, particularly commodities and cryptocurrencies |
No expiry dates to manage, unlike futures contracts |
Currency risk on international assets: spot price movements can be offset by exchange rate changes |
Access to a wide range of markets from a single platform |
Requires active monitoring, particularly for short-term leveraged positions |
Short selling is possible via CFDs and spread bets, allowing profits in falling markets |
Gap risk: prices can move sharply outside trading hours, opening at a different level to where they closed |
Key Takeaway
Leverage means losses can exceed your initial deposit. Spread bets and CFDs are not suitable for all investors. Your capital is at risk.
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Spot trading FAQs
What is spot trading?
Spot trading is the buying or selling of an asset at its current market price, for immediate or near-immediate settlement. The price agreed is called the spot price, and settlement typically occurs within two business days (T+2) in most markets.
What is the spot price?
The spot price is the current market price of an asset for immediate delivery or settlement. It is set by live supply and demand in the market and updates continuously during trading hours. It differs from the futures price, which is the agreed price for delivery at a specified future date.
What is the difference between spot trading and futures trading?
In spot trading, you transact at the current market price with near-immediate settlement. In futures trading, you agree on a price today for the delivery or settlement of an asset on a specific future date. Futures prices are typically different from spot prices, reflecting the cost of carry (interest, storage, dividends) between now and the delivery date
What is a spot market?
A spot market is any market where assets are bought and sold at current prices for immediate settlement. The foreign exchange market is the world's largest spot market by volume. Other major spot markets include those for equities, commodities such as gold and oil, and cryptocurrencies.
How is spot trading different from CFD trading?
A CFD (contract for difference) is a leveraged instrument that references the spot price of an underlying asset. When you trade a CFD, you speculate on the price movement of the asset rather than buying or selling it directly. You do not take ownership of the underlying asset, but your profit or loss is determined by the change in the spot price between opening and closing the position.
What markets can I trade on the spot with IG?
Through our spread betting and CFD accounts, you can trade spot prices across forex pairs, commodities (gold, silver, oil), global equity indices, shares and cryptocurrencies. For investors who want direct ownership of shares at spot prices, IG's share dealing and ISA accounts offer execution referenced to the live market price. You can also access diversified spot market exposure through ETFs. See our guides to the best UK ETFs and best global ETFs for options across different markets.
What is contango in spot markets?
Contango occurs when the futures price of a commodity is higher than its current spot price. This is the normal state for most commodity markets and reflects the cost of storage, insurance and financing. For investors in commodity ETPs or futures-based products, contango creates a rolling cost when contracts are renewed at a higher price. Backwardation is the opposite: the futures price is below the spot price, which can generate a benefit when rolling positions.
Important to know
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
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