What is the difference between a spot market and a futures market?

What is the difference between a spot market and a futures market Introduction: The Two Pillars of Trading Hello everyone, and welcome to today's discussion on the spot market and the futures market. These two pillars of trading play a crucial role in the world of finance, enabling transactions and shaping market dynamics. But what sets them apart? Let's dive in and find out. Spot Market: The Realm of Immediate Transactions The spot market, also known as the cash market or the physical market, is where assets are bought and sold for immediate delivery. It's the realm of instant gratification, where transactions occur 'on the spot,' hence the name. This market is highly liquid, with prices determined by the forces of demand and supply. It's the go-to for traders looking for quick deals and those who prefer the tangibility of owning the asset outright. Futures Market: Contracts for the Future In contrast, the futures market deals with contracts for future delivery. Here, buyers and sellers agree on a price and quantity for an asset, but the actual exchange happens at a later date. These contracts, often standardized, provide a glimpse into the market's future expectations. They serve as a tool for hedging against price fluctuations, allowing businesses and investors to mitigate risk.