Spread Betting the Forex Markets

Filed under: Learn Forex Trading |

Screen shot 2013-05-07 at 10.34.55There are a number of obvious advantages to spread betting the forex markets, and I would like to run you through a few of these advantages in today’s forex-related article.

 

To begin with, spread betting, like the name suggests, is officially considered to be a form of gambling, and as such, tax or capital gains do not have to be paid (unless you make a good living from it – in which case, it becomes a grey area for accountants and one for debate). Another advantage is that you do not need huge sums of money to trade. When you trade forex with a traditional broker, you often need a substantial bank to cover any margin calls. However, with spread betting, this issue is substantially mitigated. Spread betting the forex market is also much simpler on a spread betting platform, as you do not have to work out how many ‘lots’ you need to trade in order to risk X amount of money. With spread betting, the calculation becomes much easier, as it is usually $1 (or whatever currency you are betting with) per pip; so all you need to do is work out how much money you want to risk on the trade, and divide by the number of pips based on your stop loss – a calculation that even a nine year old could do.

 

The downside to spreadbetting is that the spreads are often larger, which is often more significant in the long-term than most people realise, and the charts on spread betting platforms are less reliable (in my opinion) to trade off if you use technical analysis – and generally less user friendly as well. All in all, spread betting is a very tempting option for trading the forex markets, and a lazy option really as it is in many ways much easier. A lot of people are tempted by the tax-free nature of spread betting, but this is really a false temptation for beginners, as they are unlikely to make any meaningful money in their first couple of years trading anyway.

 

 

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