Forex Spot Trading versus Spread Betting

There is a recurring question amongst UK traders about whether they should trade spot forex or whether they should go with spread betting.  I’m of the opinion that for most traders based in the United Kingdom, spread trading is the logical choice due to the tax free advantage and the ability to bet on diverse markets like indices, equities, commodities, precious metals..etc  In addition financial spread betting is very simple and easier to learn compared to traditional forex trading.  The trading platforms are usually straight forward and very fast and easy to use.   In the past my opinion would have been different but today spread betting providers have narrowed their spreads to just one or two pips which rates compete with the best forex platforms on the market.

Forex Spread Betting: How does it Work?

Forex spread betting is really very simply.  Simply choose your currency pair and if you intend to place a short daily bet go for a SPOT contract.  Just enter the amount you wish to trade with (say GBP1) and then enter your stop, which alerts you how much you are risking on the trade so you know what your maximum risk at the outset.  If you are going to hold a position for more than a day then go for a Rolling Spread.

When the forex pair reaches a certain amount simply close the trade and take your profits, if the price goes against you either close the trade and take the loss (whatever you do, don’t move your stop lower).  It really is quite straightforward and for a beginner financial spread betting is ideal.  My best advice is open a demo account for a few months though before trying the real thing.  Capital Spreads has a free demo account with 10,000 quid in it which makes it great to practice your forex trading.  You can also try a CFD account but beware that the margins are huge and CFDs gains are not tax free.

Source by John Halloway

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