A Review of Spread Betting on Forex

Spread Betting

Forex Spread Betting


The SpreadBets guide to forex spread betting:



About Forex Spread Betting



Some of the most popular markets in spread betting are the forex markets, perhaps not surprisingly the most frequently traded are Sterling/Dollar, Euro/Sterling, Euro/Dollar and Dollar/Yen.

There are many reasons why you might want to trade the foreign exchange markets:
  • The wide range of forex pairs on offer. This can be a major lure to investors owing to the many different ways in which these pairs can move depending on market conditions.

  • Forex markets can be exciting to trade because of the typically higher volatility associated with currency pairs when compared with ordinary shares or indices. Nevertheless, this same volatility can also work against even the most experienced traders and can lead to quick losses should the market work against you.

  • Forex spread betting is Tax Free*

  • Both buying and selling – you can bet on a currency pair going up or down

  • Spread bets are leveraged. You can win more than your initial stake. Remember though that you can also lose more than your initial investment.
Note that if you are trading the FX markets then using Stop Losses can help restrict your downside.


Live Forex Charts






You can also use the above chart for a number of other forex markets including currencies such as: CAD, CZK, DDK, HKD, HUF, ILS, MXN, NOK, NZD, PLN, RUB, TRY, SEK & ZAR.

If you'd like to see a chart for a particular market, just type the currency code the market field in the above chart, e.g. type:
  • EURUSD
  • GBPUSD
  • USDJPY
  • EURGBP
  • USDRUB
  • Etc.


Where Can I Spread Bet on Forex Markets?



You can put spread bets on a range of forex pairs via these spread betting platforms:

Forex

Financial Spreads ETX Capital Spreadex InterTrader Capital Spreads City Index
Dollar/Yen Daily Financial Spreads Dollar/Yen Daily ETX Capital Dollar/Yen Daily Spreadex Dollar/Yen Daily InterTrader Dollar/Yen Daily Capital Spreads Dollar/Yen Daily City Index Dollar/Yen Daily
Euro/Dollar Daily Financial Spreads Euro/Dollar Daily ETX Capital Euro/Dollar Daily Spreadex Euro/Dollar Daily InterTrader Euro/Dollar Daily Capital Spreads Euro/Dollar Daily City Index Euro/Dollar Daily
Euro/Sterling Daily Financial Spreads Euro/Sterling Daily ETX Capital Euro/Sterling Daily Spreadex Euro/Sterling Daily InterTrader Euro/Sterling Daily Capital Spreads Euro/Sterling Daily City Index Euro/Sterling Daily
Sterling/Dollar Daily Financial Spreads Sterling/Dollar Daily ETX Capital Sterling/Dollar Daily Spreadex Sterling/Dollar Daily InterTrader Sterling/Dollar Daily Capital Spreads Sterling/Dollar Daily City Index Sterling/Dollar Daily
Sterling/Euro Daily Financial Spreads Sterling/Euro Daily ETX Capital Sterling/Euro Daily Spreadex Sterling/Euro Daily InterTrader Sterling/Euro Daily Capital Spreads Sterling/Euro Daily City Index Sterling/Euro Daily
Other Forex Financial Spreads Other Forex ETX Capital Other Forex Spreadex Other Forex InterTrader Other Forex Capital Spreads Other Forex City Index Other Forex
The above spread betting markets may also be available with other companies. Also see Comparison Table Notes.



FX Market Categories



Forex markets are split into 3 groups:
  • Majors – the most active and widely traded currency pairs eg Euro/Dollar, Dollar/Yen and Euro/Sterling

  • Minors – the less active and less liquid currency pairs which are less popular than the Majors but more popular than Exotics eg Sterling/Canadian Dollar, Australian Dollar/Yen and Dollar/Danish Krone.

  • Exotics – forex pairs that are less broadly traded than any of the Major and Minor currencies eg Dollar/Czech Koruna, Sterling/Hungarian Forint, Dollar/Mexican Peso, Euro/Polish Zloty.
For more information and trading examples on specific currency pairs see:


Where Can I Get Live Forex Spread Betting Prices and Charts?



The chart above gives you a useful view of how the markets are trending.

Still, for those investors that are trading euro-dollar, the companies mentioned above offer live price updates as well as charts with more options.

Example spread trading chart from FinancialSpreads.com:

Example candlestick chart



Forex Spread Betting

Worked Forex Spread Betting Example



If you're interested in financial spread betting on a currency pair, e.g. euro-dollar, then looking at a company like CapitalSpreads.com, at the time of writing you would find a price of $1.33532 - $1.33542.

As a result, you can bet on euro-dollar to move above $1.33542 or move below $1.33532.

If you are spread trading, you speculate on every unit the market increases or decreases. With the euro-dollar market a unit is $0.00010 of the forex rate's price movement.

With this example, let's say you want to stake £2 for every $0.00010 euro-dollar rises or falls.


Speculating on a Forex Market to Increase



If you were to go long of euro-dollar at $1.33542 and the forex rate increased then the quote might become $1.34143 - $1.34153. In that case, you might want to close your position for a profit by selling at $1.34143.

Profit/Loss = (settlement price of the market - initial price of the market) x stake per $0.00010
Profit/Loss = ($1.34143 - $1.33542) x £2 per $0.00010 stake
Profit/Loss = $0.00601 x £2 per $0.00010
Profit/Loss = £120.20 profit

Of course, if the forex rate decreased to, for example, $1.32994 - $1.33004, you might want to close your bet to restrict your losses. If so, you would sell at $1.32994.

So, with the same £2 per $0.00010 stake:

Profit/Loss = (settlement price of the market - initial price of the market) x stake per $0.00010
Profit/Loss = ($1.32994 - $1.33542) x £2 per $0.00010 stake
Profit/Loss = -$0.00548 x £2 per $0.00010
Profit/Loss = -£109.60 loss


Speculating on a Forex Market to Decrease



One useful benefit of spread betting is that you can short the markets, i.e. bet that the markets will fall.

The original market was priced at $1.33532 - $1.33542.

If you were to sell euro-dollar at $1.33532 and the forex rate went down then you might see the quote drop to $1.33011 - $1.33021. Assuming this was the case, you could close your position for a profit at $1.33021.

Profit/Loss = (initial price of the market - settlement price of the market) x stake per $0.00010
Profit/Loss = ($1.33532 - $1.33021) x £2 per $0.00010 stake
Profit/Loss = $0.00511 x £2 per $0.00010
Profit/Loss = £102.20 profit

The markets do of course rise, if the forex rate had moved up to $1.33987 - $1.33997, you may decide to close your bet to prevent further losses. Therefore, you would buy at $1.33997.

You would close your bet with the same £2 per $0.00010 stake:

Profit/Loss = (initial price of the market - settlement price of the market) x stake per $0.00010
Profit/Loss = ($1.33532 - $1.33997) x £2 per $0.00010 stake
Profit/Loss = -$0.00465 x £2 per $0.00010
Profit/Loss = -£93.00 loss


Euro-Dollar Rolling Daily spread betting market quoted as of 12-Aug-14.

Note that this is a 'Rolling Daily' trade. This kind of trade doesn't have a preset closing date and rolls over to the next session automatically. When a market rolls over you may receive a small credit or incur a small financing cost. For more, see rolling daily spread betting markets.


Advert Financial Spreads Spread Betting - No Fees, No Commissions, Free Charts and Live Prices.
Spread Bet on Indices, Forex, Commodities, Shares and more. For details see Financial Spreads.



Forex Demo Accounts



The following firms also have free test accounts. I.e. accounts which you can use to have a go at forex trading without risking your money.

Financial Spreads   > Financial Spreads

GFT   > GFT

InterTrader   > InterTrader



Basics of Forex Trading



In this brief video, spread betting provider IG discusses the absolute basics of currency trading:




FX Options Trading



GFT offers traders the opportunity to trade FX options using the GFT DealBook® trading platform.

An option is a contract between a buyer and seller for the right to buy or sell an underlying financial product at a specific price on a particular date. With FX options, the underlying product is a currency pair.

Traders can trade over-the-counter vanilla calls and puts on ten currency pairs. In the FX options module, the New Order window supports several common spread strategies, including verticals, straddles, strangles and risk reversals.

FX options at GFT are settled in the European-style; that is to say “in-the-money” options are automatically exercised as a position.


Chinese Renminbi Markets



Using the Hong Kong deliverable (CNH), GFT clients can trade the Chinese Renminbi against both the US dollar (USD/CNH) and the Japanese Yen (CNH/JPY) on a spot basis.

Also see our Chinese renminbi spread betting guide.



User Questions and Answers on Forex Spread Betting



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Advert Financial Spreads Spread Betting - No Fees, No Commissions, Free Charts and Live Prices.
Spread Bet on Indices, Forex, Commodities, Shares and more. For details see Financial Spreads.



'Forex Spread Betting' last update by James White, 14-Jun-2015





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