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What is Forex Spread Betting? How to Spread Bet on FX Markets

TradingView is the new spread betting platform on the block and comes with the most advanced charting tools available and...

What is Forex Spread Betting? How to Spread Bet on FX Markets

what is spread betting forex

TradingView is the new spread betting platform on the block and comes with the most advanced charting tools available and comes with over 100+ technical analysis tools built-in. If you like to use technical analysis and annotate your charts, then TradingView is a top choice. The below table is a summary of the differences between spread betting vs CFD trading. With that said, you could deposit more funds than required and bet with a tight stop-loss to limit the risk of losing. Now that you’re equipped with everything you need to know, opening a spread betting account with Trade Nation is quick and simple. So, you might decide to place a buy spread bet on GBP/USD at £10 per point, predicting the price could rise in your favour.

what is spread betting forex

The deal ticket will allow you to enter your stop loss and take profit orders before executing your bet. Both Forex trading and spread betting allow the trader to profit in any type of market, whether it is rising or falling. Similarly, in Forex trading, it is possible to make a profit whether the market goes up or down depending on whether the investor chooses to buy or sell. In spread betting, there is no commission to pay on any transaction as the spread betting provider makes their profit from the difference between the bid and the ask prices.

For example, if there's a buy position open on GBP/USD, but the market starts going down, you could open a sell position to counter the loss of the buy position. Define your trading objectives, entry and exit criteria, risk management guidelines and overall strategy. Experience a more rewarding way to trade, with access to reduced spreads of up to 28.6% through our tiered-volume fee discount scheme. Spread betting is the most popular product on our platform in the UK, closely followed by CFD trading​. Spread betting is a way to bet on the change in the price of some security, index, or asset without actually owning the underlying instrument. Most often, the trade will end up in breakeven, so it’s important to keep your eyes on the market while the trades are open.

How you can start spread betting with Trade Nation?

You’d buy the pair if you expected the base currency to rise in value against the quote currency. Before choosing an FX pair to trade, you should carry out fundamental analysis and technical analysis on the two currencies in the pair. This means you should assess how the ‘base’ (the currency on the left) and the ‘quote’ (the currency on the right) move in relation to each other. Spread betting can be profitable, but traders need a well-defined strategy and a disciplined approach to trade. Forwards, by contrast, means you are obligated to buy or sell the agreed rate in the contract at a set date in future. Because of this extra flexibility, you pay an extra premium compared to Futures.

what is spread betting forex

It has an excellent interface that looks like a professional terminal and lots of space for charting, but it remains easy to navigate. Spread betting on the forex markets means you only have to pay the spread to enter the markets (which are tight) with no commissions, meaning all costs are paid at the execution of the bet. While using CFDs, some brokers charge commissions along with the spreads, which are charged at the entry and exit of the trade.

This is also the case with spot Forex, as the brokers typically charge commissions only on their Electronic-Communication-Network (ECN) accounts. Similar to spread betting, spot Forex transactions are monetized by the spread markup. The advantage of forex spread betting is that it allows traders the ability to utilize the concept of leverage when placing a trade. Simply put, leverage lets the investor borrow money, usually from the brokerage firm, to place bets on a currency.

Forex spread betting enables speculation on currency pair movements without direct foreign exchange transactions. This approach lets traders bet on potential rises or falls in value, offering a chance for profit based on market trends. Spread betting is a derivative product, which means you’re trading via leverage – without taking ownership of any currency outright. Trading on leverage also means you only need to put up a small deposit (called margin) to open a larger position. However, as your total profit or loss is based on the full size of your position, either could significantly outweigh your margin amount.

How to Forex Spread Bet

Spread betting has built-in leverage with its bet sizes, magnifying your losses (and profits) when the markets move against you. The smallest movements, like 20 pips, can take you out with leverage, while if you held the whole position with no leverage, you wouldn’t even notice the move. Forex trading is known to have low trading costs due to having highly liquid markets, but some brokers require a commission when you trade the currency markets. All spread betting firms offer spread-only accounts with no commissions, providing a simple pricing structure and no direct charges to your spread betting account. The first step is to choose the currency pair you want to spread bet on first, most brokers offer 40 to 100 pairs to choose from. If you are a beginner, choosing one of the major forex pairs like EUR/USD or USD/JPY would be ideal as they have lower spreads and less volatile movements.

  1. You should consider whether you understand how spread bets, CFDs, OTC options or any of our other products work and whether you can afford to take the high risk of losing your money.
  2. While you will not need to pay a capital gains tax, unlike with CFDs, you cannot offset losses for tax returns.
  3. TradingView is the new spread betting platform on the block and comes with the most advanced charting tools available and comes with over 100+ technical analysis tools built-in.
  4. Both Forex trading and spread betting are leveraged products, meaning that the investor is only required to place a small amount of the entire value of their position.
  5. The bid price reflects the price you would use to buy the base currency, whereas the ask price reflects the price you would use to sell the base currency.

For traders who want flexibility, accessibility and forex market opportunities, spread betting is an attractive option. Traders can use leverage to maximize market opportunities, but a well-defined trading and risk management strategy is crucial. The “spread” in spread betting refers to the difference between the buying and selling prices of a currency pair. This spread is represented in pips and is the main source of profit for spread betting providers. Traders make profits or losses based on the accuracy of their predictions and the price movement of the currency pairs.

Managing Risk in Spread Betting

Having traded since 1998, Justin is the CEO and Co-Founded CompareForexBrokers in 2004. Justin has published over 100 finance articles from Forbes, Kiplinger to Finance Magnates. He has a Masters and Commerce degree and has an active role in the fintech community. It’s consistently updated with new features like automated Fibonacci levels and candlestick pattern scanners, and you can develop your own technical indicators.

As previously stated, going long refers to placing a bet when a trader predicts the market price will rise in value over a certain amount of time. No problem – start off in a practice environment with our free demo account and £10,000 virtual funds, plus get exclusive educational content on IG Academy., registered with the Commodity Futures Trading Commission (CFTC), lets you trade a wide range of forex markets with low pricing and fast, quality execution on every trade. Traders can choose to go short (sell) or go long (buy) depending on their market outlook. The outcome of their bets depends on the accuracy of their speculations and whether the market moves in the anticipated direction or against it.

What Are The Advantages Of Forex Spread Betting?

Spread betting and Forex trading are carried out on the same trading platforms using the same interfaces. This means that both are equally easy to do as the interfaces are user-friendly and designed to accommodate the needs of traders both experienced and novice. When dealing in any form of official financial speculation, such as Forex trading, the investor must pay tax on their profits.

These include trend following, news trading, forex scalping​ and hedging forex​, of which the latter is a method of protecting against currency risk. When you start a live account, you are both excited to earn money and anxious about losing it. So, I recommend starting with the minimum stake size when transitioning from a demo account to a live one. This small start allows you to have skin in the game but lowers your risk of the amount you may lose. Over time, as you build experience and confidence, you can scale your bet sizes as you please.

The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination. Depending on how the underlying market is doing, it will affect forward and forex option contracts. When you are happy with the bet size and direction of the market, you can place your bet by clicking the place order button. As a side note, the broker you use will quote the two prices for the specific asset you want to trade.

You might need to become familiar with the type of market you could decide to partake in. You could become knowledgeable in various ways, such as looking at economic data and events, any important economic announcements that are known to move the market, and through chart review. If you decide to buy GBP/USD at £1 per point and it moves up with 40 points, you would make £40 (£1 x 40), but if it falls by 40 points, you would lose £40. Unlike traditional investments, you only speculate if the price of a particular asset will go up or down instead of owning the actual asset. Forex forwards are derivatives that give you the obligation to buy or sell FX at a specific price, on a specific date in the future.