Differences Between Forex Trading and Spread Betting

Comparing Forex Trading versus Spread Betting

Spread betting and forex trading have equally become extremely popular over the past decade, enabling traders to make money speculating on financial markets and currency movements in highly leveraged positions and high risks and rewards.

But, considering both Forex trading and spread betting require similar skills, data and market analysis, which is better, spread betting or forex trading?

In this article, I’ll run over give of the biggest differences between spread betting and Forex trading, both from the customer, market, profits and UK government’s viewpoint.

The Differences between Forex Trading and Spread Betting

1. The major advantage to using a forex broker such as FXPro or eToro as opposed to a spread betting platform to make trades is that a Forex broker will provide you with all the tools in place. Professional tools including currency news and research, data, candle stick graphs, Fibonacci formulas and advanced trading applications. The specialisation of service for forex trading gives you a slight edge trading through a forex platform.

2. Forex deposit margins tend to be a lot higher and give you greater leverage than a spread betting broker. Most Forex firms will offer 100 up to 200:1 margins where as in spread betting you will be limited to 10:1. For example, if you have $10,000 in your account, than you can hold trading positions worth up to $1 million in Forex, but only $100,000 in spread betting markets.

3. Forex markets run 24/7. This gives you greater flexibility and functionality trading through a forex broker, as opposed to a spread betting broker who tends to be closed during the weekend and at 6pm during the week.

4. Spread betting profits are tax-free from capital gains and Stamp Duty, giving you extra profits (which are why it is classified as gambling). Many people will trade through Forex purely so that they can say they can claim to make money through a professional trade. Interestingly, questions have arisen over whether spread betting profits will remain tax-free. However, the Inland Revenue has never made public intentions to tax spread bettors, nor is there a single spread bettor in the UK who declares all of his income from it.

5. Hidden charges through FX brokers in the form of othaddition interest charges for holding long term trades can incur small costs. Forex spread betting on the hand takes place on “rolling” markets and products, which have no daily charges or interest rates for holding the position open.

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