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.
Live Forex Charts
Live EURUSD Chart
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.
Basics of Forex Trading
In this brief video, spread betting provider IG discusses the absolute basics of currency trading:Where Can I Spread Bet on Forex Markets?
You can put spread bets on a range of forex pairs via these spread betting platforms:
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| Gold Daily |
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| Gold Futures |
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| UK Crude Oil Daily (Brent) |
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| UK Crude Oil Future (Brent) |
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| US Crude Oil Daily (WTI) |
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| US Crude Oil Future (WTI) |
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| Other Commodities |
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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/Swedish Krone.
- Exotics – forex pairs that are less broadly traded than any of the Major and Minor currencies eg Dollar/Chinese Renminbi, Dollar/Czech Koruna, Sterling/Hungarian Forint, Dollar/Mexican Peso, Euro/Polish Zloty.
- AUD-USD
- EUR-AUD
- EUR-CHF
- EUR-GBP
- EUR-JPY
- EUR-USD
- NZD-USD
- GBP-AUD
- GBP-CHF
- GBP-JPY
- GBP-USD
- USD-CAD
- USD-CHF
- USD-CNH
- USD-JPY
- USD-MXN
- USD-NOK
- USD-ZAR
- USD-SEK
Forex Futures
As mentioned elsewhere on this page, CMC Markets has one of the widest ranges of exotic forex markets.Of more interest might be the fact that they still offer forex futures on the majors unlike most spread betting platforms that just offer rolling, aka DFB, aka cash, aka spot, markets on the majors.
Looking for Exotic FX Markets?
If you’re having a problem finding a specific forex market then take a look at CMC Markets.Most spread betting companies offer 30+ of the currency bigger pairs and those market will probably cover 99% of forex spread bets.
IG has a wider range still.
However, CMC seems to have the widest selection of ‘cash’ (aka ‘spot’) forex markets, including rarer crosses like CAD/PLN, CZK/NOK, DKK/ZAR and MXN/TRY.
Wide Spreads on Exotic FX Markets
Of course, if you are one of the rare souls who actually trade these rare markets then, as with exotic pairs on any platform, expect some fairly wide spreads.Example of exotic currency markets on CMC:
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 Spreadex, 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.
Factors that Influence the FX Markets
If we had a complete list of all the factors that influence the forex markets and could assign the correct weight to every factor in every given situation, it would be easy to make money with forex trades.As things stand, however, something often happens, like the tsunami in Japan, which nobody expected and which throws forex markets into complete disarray for some time. Having said that, there are some factors which consistently affect the forex markets.
Interest Rates
If everything else were equal, the country with the highest interest rate would enjoy an inflow of investment money as investors could expect a higher return on their capital.
Inflation
Countries with high inflation rates will often try to counter them by increasing their interest rates. As stated above, local currencies of countries with high interest rates are often attractive.
As a result, higher interest rates strengthen the demand for its currency which can push up its price or exchange rate compared to other currencies. This can often happen in the market even if there is the expectation of an interest rate hike.
Balance of Trade
If America should import a lot of products from Europe, for example, it would strengthen the demand for the Euro as Americans are converting Dollars into Euros to pay for the goods.
Eventually the exchange rate of the Euro against the Dollar will start to increase.
Central Bank Interference
If, as mentioned in the previous paragraph, the Euro strengthens significantly against the Dollar and the American Central Bank, the Federal Reserve, doesn’t want this, the bank can interfere in the market by buying Dollars or selling Euros.
This will tend to strengthen the value of the Dollar and/or weaken the Euro and restore the balance that existed earlier.
Speculation
It is not only imports and exports that drive the forex markets. There are also a huge number of speculators in the market who simply trade in the forex markets through forex spread betting, CFDs or otherwise.
Some industry analysts even claim that speculators have become the strongest force in the forex markets.
If a large investor such as George Soros should suddenly buy a vast amount of Paraguayan Guaranis, the price of this small currency could jump through the roof overnight. If he sells the same amount the following day, the price would probably drop to where it was before or perhaps even lower.
Political Stability
Political instability is one of the biggest enemies of any currency.
If a military coup should take place in a country in the Middle East then it’s likely that the country’s currency will drop. This is because people are more willing to invest in stable countries.
Conversely, a long period of political stability usually leads to a stable currency.
Employment
High unemployment figures are usually a sign that something is wrong with the economy of a particular country.
This means the GDP may also be contracting and exports falling. If so the currency in question might also drop as speculators expect the government to weaken the currency in order to help boost exports.
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.Chinese Renminbi Markets
Using the Hong Kong deliverable (CNH), investors can trade the Chinese Renminbi against the US dollar (USD/CNH) on a spot basis.Also see our Chinese renminbi spread betting guide.
Spread betting carries a high level of risk. You can lose more than your initial investment or stake. Spread betting may not be suitable for all investors. Only trade with money that you can afford to lose. Make sure you fully understand the risk involved. If necessary, seek independent financial advice.