Spread betting forex brokers

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Take a look at some of the components of spread betting : What is spread? Spread is simply defined as the difference between the bid buy price and the ask sell price. Spreads in the forex market are measured in pips, which is the smallest unit of the price movement of a currency pair. As a forex trader, you should look for spread betting brokers that offer low and tight spreads. Lower the spreads, lower the percentage of profit you have to share with your forex broker.

See a list of all the lowest spread forex brokers here. What is leverage in spread betting? Leverage refers to a substantial amount of money that you have borrowed from your broker. Here, it is important to note that as good as leverage sounds, it can be quite risky in spread betting. Leverage magnifies both profits and losses as these are calculated based on the full value of the position, not just the initial deposit. So if the bet that you have placed goes in the opposite direction, while you are trading with leverage, you can incur significant losses.

What is margin in spread betting? Margin is the amount of money you need to have in your account to open a leveraged position. Margin covers you against the losses in your trade. So, when you spread bet, you submit a small initial deposit, with your forex broker — known as the margin, to open a position. Maintenance margin: These are the additional funds that might be required if the open position starts to incur losses that are not covered by the initial deposit.

If this situation arises, traders get a warning known as a margin call — asking you to either increase the funds or take the risk of having your position closed. What is bet size? The bet size is the amount you want to bet on the underlying market asset. Traders have the choice to choose their bet size as long as it meets the minimum accepted by the forex broker. The profit or loss, earned in spread betting is calculated as the difference between the opening price and the closing price of the market, multiplied by the value of the bet value placed by the trader.

What is bet duration? As the name suggests, bet duration refers to the time you can hold your bet, till it expires. Usually spread bets last for days or a few months. Spread betting sites offers traders to either place quarterly bets or daily funded bets. Quarterly bets are futures bets that expire at the end of a quarterly period, which can be renewed if the trader wishes to. Whereas daily funded bets run for as long as a trader chooses to keep them open. However, they do have a default expiry in the distant future.

Can you spread bet forex? Yes, several spread-betting forex brokers allow traders to easily place bets on forex trade. Here is how you can place a bet on forex From the range of assets provided by your broker, choose an asset that you want to bet on. After, choosing the asset select buy or sell. Here, buying does not mean the ownership of the asset. Add a stop loss or take profit. A stop-loss automatically closes the spread bet if it falls under a certain price.

Lastly, you need to monitor the trade. You can close your bet at any time you feel satisfied with your profits. How does spread betting work in the forex market? Here are a few tips on how to spread bets to get profits: Research the market before placing the spread bets The most important step, to attaining profits in forex trading is market research.

It is the key to placing successful trades, and you should not overlook this step. If you are new to the market, then you can take the help of various spread betting sites and brokers that can provide you with market information and give you knowledge about which asset you should place your bets on.

Make use of the demo account Demo accounts are a great way to learn some strategies and experience in spread betting. It does not involve actual money so it is completely risk-free. Demo accounts are also the best way to gain trading experience without risking your money. After you gain experience on a demo account, you can place a few small spread bets on a live trading account.

Choose small bet sizes To start with spread betting, choose small bet sizes. Having a small bet size minimizes the risk of losing big amounts of money in case your speculation of the price movements goes wrong. Avoid large leverage Taking large leverage from your forex broker can significantly magnify your profits, but it comes with a high risk of losing a lot of money, and you should avoid that risk.

Even if there is a slight price movement in the opposite direction of the bet you have placed, you can incur significant losses. Do not choose a highly volatile asset Volatile assets have a lot of unpredictable price fluctuations, which makes it more difficult to make a correct prediction for either the rise or fall of the price of the asset. So, you should choose a less volatile asset because the price fluctuations are more predictable for these assets.

For example, if it increased by exactly 1. Scalping, which is a viable very short-term trading strategy relies on tight spreads. Because of this reason, scalping is somewhat unsuitable for a spread betting account due to the wider spreads seen versus a zero spread or ECN forex trading account, so finding a spread betting broker for scalping can be challenging.

Margin Trade Requirements The margin requirement for a spread bet consists of the amount the spread betting broker requires a speculator to deposit to establish a spread bet, which generally represents a fraction of the value of the underlying asset. Margin requirements for spread betting vary among the different brokers and generally depend on the underlying assets that are traded.

However, a trader would need to deposit more than the minimum to avoid margin calls which would close the trade if the price moves against them. If you take advantage of the leverages offered by a broker, you are borrowing capital for trading from brokerage firms. Interest is charged on the borrowed funds and can accumulate rapidly. The interest can either work in your favor or cut into your profits depending on the asset and position taken.

For example, IG charge 2. Is the Broker Regulated? Regulation is one of the most important factors to consider when choosing a spread betting broker. This prevents brokers from withdrawing client funds or using them for operational expenses. While the FCA allows spread betting brokers to advise clients on the most suitable type of spread bet, the regulator prohibits spread betting firms to give clients any financial advice.

This means that brokers cannot recommend trades, when to liquidate them or when to take profits on their trade. Be cautious if a firm is offering this kind of advice as it could be going against the FCA regulatory guidelines. Market Diversification and Broker Expertise For a speculator to diversify their risk and maximize the number of opportunities from the market conditions they look for to signal a trade setup, the broker must provide spread betting on a wide range of indices, forex currency pairs, equities, commodities and other active markets.

A further consideration when choosing a broker for spread betting consists of the expertise the broker exhibits in executing transactions in each particular market. In general, the more markets a broker offers access to has substantial advantages to a speculator, largely because they only need a single spread betting account instead of many accounts held at different brokers to vary their trading activities among diverse markets.

Avoiding Currency Risk on Liquidation When spread betting on foreign currency denominated assets, there should be no currency risk when liquidating the position. Dollar exchange rate. Dollars back into Sterling. Customer Service Customer service in spread betting is an important factor just as it is in other types of trading. The broker should be available at all times. This is important when the trader needs to quickly withdraw from certain positions or if the platform breaks down during trading hours.

Some brokers may only offer email or phone support where others like City Index will offer email, phone and live chat support via their website. Although traders should see what spread betting broker best suits their particular situation and offers the best spreads for their preferred asset classes. You can compare the features of their award-winning proprietary web-based, mobile and tablet betting platforms here.

City Index also offers several platforms including a downloadable AT Pro platform, Web Trader, and mobile trading apps.