eToro (Europe) Ltd., a Financial Services Company authorized and regulated by the Cyprus
Securities Exchange Commission (CySEC) under the license # 109/10
You may think that all financial transactions in the Foreign Exchange Market belong to just one big category called foreign exchange trading, but in fact, there are many different types of trading. In the FX market, one can trade currency options or conversely currency futures. Even in the sub category of currency options one can purchase a put option, a call option, option chains or a single payment option, just to name a few. Sounds complicated? It is, but fortunately most of today’s global financial trading providers stick to just one kind of trading and that is SPOT Forex trading.
SPOT is the acronym of “single payment option trading” and it is the most common type of currency options trading. With a regular put/call options contract, the trader buys the right, but not the obligation, to purchase or sell a certain amount of currency at a certain date. As opposed to futures trading, a currency option contract lets the trader choose whether to proceed with the purchase or to back out, whereas with a futures contract the trader is committed to the deal. The benefit of options trading is that it decreases the risk taken by the trader. The drawback is the premium they have to pay the broker. Many offline and online brokers offer traders a currency option sample, but you must be careful not to fall into a scam.
SPOT Forex differs from this kind of currency options trading because the contract is settled immediately. Essentially, SPOT automatically converts your option to cash when your option trade is successful, giving you a payout. It is like setting a take profit order at a certain price level and receiving the cash out if and when the currency pair reaches the set price rate. It differs from over the counter currency trading because no physical commodities actually exchange hands until after the contract is closed.
The first choice any trader has to make is where to trade. eToro is the perfect place to start trading spot Forex because it offers you easy access to the market and the opportunity to join the world’s largest social trading network. Social trading is incredibly beneficial to its members because they all get to share in the collective pool of knowledge that traders, including the top traders, bring to the table. By being exposed to their know-how you can pick up successful trading strategies in no time, and in the meanwhile you can build a “people-based” currency trading portfolio, with the use of our groundbreaking Copy Trader feature. Eventually, eToro enables you to become a top trader yourself by taking advantage of our many educational tools such as our eToropedia, our specially developed e-course and our personal account managers.