In the course of my research, I’ve frequently encountered the term “spot” (e.g. “spot exchange rate,” “spot contract,” etc.). Can someone offer a succinct definition of this term? I’m still trying to understand how it operates as a qualifier. That is, what is the difference (if there is one) between the spot exchange rate and the exchange rate, or a contract and spot contract.
Thanks for your help.
A spot rate is quite literally the price that an order can be executed at by your broker or market maker. It’s the bid/ask price at that exact moment in time, regardless of it being a security, currency or commodity (or any derivative for that matter).
The exchange rate will also be the same as the above, just a difference in terminology. Why would you want to place a trade at a rate that is different to underlying exchange price at that moment in time; unless it benefits you, however I’ve not seen brokers allow you to rewind the clock as of yet 
So “spot rate” and “exchange rate” are functionally interchangeable?
Dont overcomplicate this bro. Spot simply means right here right now.
Spot rate = current exchange rate …?
Yep. And your job is to figure out where it will go next.
Alright. Very helpful. I appreciate the information.
in the sense of retail trading, yes. Not to be confused with your local bank who have an exchange rate for the day in question where you can exchange tangible money for a other currency.
“An exchange rate for the day…”
So if I walked into my local BoA at 10am and checked the dollar yen rate, then returned at 4pm, the rate would remain the same? They don’t float with the market moment to moment?
They will remain fixed for the day in question - as long as they don’t deviate by a given percentage which is agreed by BoA in this instance.
They will have their own hedging rules and offsetting risk criteria well established. The commission they charge will more than make up for any ‘normal’ deviation in the rate they quote for the day and the actual spot rate.
As an example, go and look at the buy and sell rate from BoA. Work out the spread (the difference between the two). Now log into your platform and look at the same currency pair… the spread charged by banks for real currency exchange is multiples of what you get when speculating with a retail broker. Another reason why they ‘fix’ it for the day. This is simply their margin of error.
Not really. Although for a retail forex traders they can be treated as such.
Exchange rate is just the rate at which the two currencies are traded.
Spot rate is the rate at which the currencies are traded now, as James mentioned, i.e. it is the spot exchange rate
In the real world of forex there are also forward rates, meaning you buy/sell the currencies for settlement at a specified future date at a rate that is fixed now. i.e. the forward exchange rate.
Forward and spot rates are usually different depending on, for example, the interest rates of both currencies involved.
Spot transactions in the real world usually settle (i.e. the physical cash is transferred from bank account to bank account) 2 days after the trade is made. But since retail trading through a broker does not actually involve any real money changing hands there is no settlement.
So, from a retail trader perspective you can consider the terms exchange rate and spot rate as being the same.
They vary.
Some banks have a “daily rate”. With some it’s “twice daily”. With a very few (for example in the British Channel Islands and some other “tax-haven jurisdictions”, where they expect to do a big volume of currency transactions), it’s actually hourly.
But surprisingly often, it’s fixed for the entire business day, barring very unusual circumstances.