Spread Betting on Forex
Forex Spread Betting Companies
You can take positions on a wide range of forex spread betting markets with the following companies.
Forex spread betting may also be available with other companies - notes.
|EUR/USD (spread size)
|GBP/USD (spread size)
|Forex (min stake)
|Forex (more available)
Forex Spread Betting - Market Review
Spread Betting on Forex - 17 May 2013
With two Fed members discussing a possible tapering of QE, the euro-dollar rate struggled for gains and slipped back below the $1.2900 level to $1.2880.
Despite the move, the pair did manage to finish unchanged on the day following some earlier strength.
Spread Betting on Forex - 16 May 2013
On the forex markets, the EUR/USD pair took another sharp move to the downside yesterday.
Preliminary data showed that Eurozone GDP contracted by 0.2% in the first quarter which, when paired with worse-than-expected German GDP, saw the euro fall to $1.2875.
Spread Betting on Forex - 15 May 2013
In FX spread trading, the euro-dollar pair made a further move away from its most recent trading range yesterday, increasing the distance from $1.3000 by closing at $1.2935.
Relatively bad economic data from Europe, with a lower than expected Zew Index number, put pressure on the euro when compared to the stronger US economic indications.
Spread Betting on Forex - 14 May 2013
Having traded as low as $1.2940 during the session, the euro-dollar market ended the day fairly unchanged at $1.2980.
The pair will have all eyes on the German Zew data out this morning as well as Wednesday's GDP data.
Spread Betting on Forex - 13 May 2013
The euro/dollar market has broken out of its most recent trend by moving to the downside, with the currency pair now sitting at $1.2965.
The dollar has been given a boost by strong US economic figures and renewed hopes that the Fed's stimulus will be cut back.
Spread Betting on Forex - 10 May 2013
The euro/dollar FX spread betting pair is still trading in the range that it has held for most of April and May, but yesterday the pair moved towards the lower echelons of the territory.
The strengthening of the dollar came on the back of better-than-expected weekly jobless claims in the US.
This helped dismiss any fears that the US economy might be entering a difficult period.
Spread Betting on Forex - 09 May 2013
The euro appreciated against the dollar yesterday as strong German data gave the single currency a lift.
German Industrial output rose by 1.2% in March, however, whilst this has calmed fears about the state of the Eurozone's largest economy, it has also reduced the likelihood of another rate cut in the short-term.
Spread Betting on Forex - 08 May 2013
In currency trading, the EUR/USD pair looks comfortable in its current range between $1.30 and $1.32 and will need to break either of these markers to set a clearer direction going forward.
The euro did see a move to the upside during yesterday's trading, but after an hour or two the pair decided that it didn't like it up there and came back down to settle mostly flat.
Spread Betting on Forex - 03 May 2013
As widely anticipated, the benchmark interest rate in the Eurozone was lowered by 25 basis points to 0.5% yesterday, with ECB President Mario Draghi refusing to deny that further cuts could take place.
The move was adopted as a result of climbing unemployment coupled with a decline in inflation and set against a background of persisting economic contraction.
The reaction was rather swift in the forex markets, with the EUR/USD pair losing 115 points for the day to close at $1.3064.
Spread Betting on Forex - 02 May 2013
Across Europe, the first of May brought occasionally violent demonstrations against the austerity measures which are now even being questioned by Brussels' officials.
However, the common currency paid little attention, with the EUR/USD pair surging to its highest level since 25 February at $1.3242, only to retrace towards the close and settle just 15 points up at $1.3165.
With the Eurozone still in recession, the ECB is widely expected to cut rates by 0.25% at its meeting today.
Spread Betting on Forex - 01 May 2013
In FX spread betting, the common currency managed to reverse course yesterday, recouping earlier losses as speculation that the ECB will cut interest rates on Thursday boosted sentiment towards the Eurozone.
In addition, the 68 point gain to $1.3167 might have been helped by resilient US confidence figures, which fuelled the afternoon's risk on sentiment in global markets.
Spread Betting on Forex - 30 April 2013
Amid widespread expectation that the European Central Bank will cut its benchmark interest rate to a record 0.5% from 0.75%, the euro-dollar pair surged 47 points to $1.3098 yesterday.
The rally was supported by news that Italy, which finally managed to form a government, was able to sell five and ten year bonds at the lowest yield since 2010.
Spread Betting on Forex - 29 April 2013
European Central Bank officials have been quick to point out that bailing out Cyprus by imposing levy on deposits did not trigger large scale withdrawals.
Although that is debatable since capital controls are in place and the long term effects on investors’ confidence is anyone’s guess. Nevertheless, the euro found enough strength to gain 23 points on Friday to close at $1.3033.
Spread Betting on Forex - 26 April 2013
Amid growing speculation that the European Central Bank will cut its record low interest rate at next week's meeting, the shared currency finished rather flat at $1.3012.
Although the recent economic data from the Eurozone has been pretty disappointing lately, with Spanish unemployment hitting a record 27.2% and even Germany showing signs of weakness, the euro has been largely range bound.
Spread Betting on Forex - 25 April 2013
True to its recent pattern, the euro started the day on the back foot, even sliding briefly below the $1.30 mark, only to rebound during the afternoon and close 13 points higher at $1.3016.
The German confidence numbers confirmed an already pessimistic mood among European spread betting investors.
However, reassuring comments by ECB Vice President Constancio that the central bank 'has room to act on a rate cut' somehow saved the day.
Spread Betting on Forex - 24 April 2013
The German purchasing manager index has undoubtedly disappointed forex investors, casting doubt on there being better days ahead for Europe's biggest economy.
At the same time, data for PMI in the whole region was also weaker than forecast, triggering speculation that the ECB might consider slashing interest rates to help the faltering economy.
As a result, it was little surprise to see the euro losing 63 points versus the US dollar to trade at $1.3002.
Spread Betting on Forex - 23 April 2013
The euro-dollar pair traded within another tight range yesterday, ending just 8 points lower at $1.3065, as consumer confidence in the Eurozone surprised to the upside.
Although it is too early to interpret that as a sign of emergence out of recession, the report came as a breath of fresh air given the recent bailout in Cyprus and news of record unemployment.
Spread Betting on Forex - 22 April 2013
The European Central Bank President Mario Draghi gave a gloomy verdict on Friday, saying the Eurozone 'has not improved' in the past few weeks.
He signalled a potential cut in interest rates as well as employing a whole range of other measures in an attempt to stop the contraction and spur growth.
In forex spread betting, the euro rose to $1.3128 in the first part of the session but a late retracement cancelled off the initial gains.
Spread betting and CFD trading carry a high level of risk and you can lose more than your initial deposit so you should ensure spread betting or CFD trading meet your investment objectives and if necessary seek independent advice.
Market Commentry from Financial Spreads.
Financial Spreads - tax free* trading on over 2,500 spread betting markets. With a Financial Spreads Account you can trade commission free, 24 hours a day on stock market indices, forex, shares commodities and...read review » Financial Spreads.
Introduction to Forex Spread Betting
The forex market is the largest and most liquid market in the world with average daily turnover estimated at $3.98 trillion, according to the Bank for International Settlements (BIS).
Also known as FX, foreign exchange, and currency trading, forex was once closed to individual speculators, reserved only for global banks or multi-national corporations. However, with spread betting companies such as Spreadex you can access a wide range of forex spread betting markets.
Benefits of Spread Betting on Forex
The forex markets are some of the most popular markets in financial spread betting particularly sterling/dollar, euro/sterling, euro/dollar and dollar/yen.
There are many reasons why investors 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 in the respective countries / currency zones
- With firms like Financial Spreads and IG Index, you can trade a wide range of forex markets 24 hours a day, Monday to Friday.
- The forex spread betting markets can be exciting to trade due to the fact that they can be highly volatile when compared with other shares or indices. Nevertheless, this same volatility can also work against even the most of experienced traders and can lead to quick losses should the market(s) not go in your favour.
- Spread bets are leveraged; therefore you can win more than your initial stake. Remember though, you can also lose more than your initial investment
- Spread betting on forex markets is Tax Free*.
- You can buy and sell the forex markets, ie spread bet on a currency pair to move up or down.
- Note that if you are forex trading then using Stop Loss orders and Guaranteed Stops can help restrict your downside.
The Basics of Spread Betting on Forex
According to spread betting firm, Spreadex, "The simple thing to remember when trading an FX pair is that if you expect a first named currency to appreciate in value against a second named currency you would 'buy' a spread bet on that pair. If you expected a first named currency to depreciate in value against a second named currency you would 'sell' a spread bet on that pair.
"For example, if you expect the pound to gain against the dollar you would 'buy' GBP/USD, which may mean you placing a £4 buy on a Spreadex quote of $1.6550-$1.6553 (so you would buy at $1.6553). If you expect the pound to fall against the dollar you would 'sell' GBP/USD at $1.6550 in the above example.
"Also remember that the spread is usually based on movements per 0.0001 of the currency (with the one exception being USD/JPY which is traded per ¥0.01 of currency movement).
"Given that currency movements can be very volatile this can result in potentially huge swings meaning large profits, or alternatively large losses. So ensure you have stop losses or guaranteed stops in place to limit your downside.
"Also, with Spreadex you will need 100 x your stake as an available trading balance to cover the potential volatility. So, based on the £4 stake size example above, you would need £412 available as a trading balance to place the trade (100 x your £4 stake plus £12 to cover the spread [3 pips x £4]).
"You can place FX bets on both spot or future prices with Spreadex. Spot prices are tighter (giving you greater value in your spread bet), however if you wanted to keep a spot trade open for longer than a day you would incur a rolling charge. You would also need to make sure you had your trade preferences set for your trade to roll. Future FX spreads are wider, but you would not incur a roll charge if you wanted to keep the trade open for a longer period of time."
How to Spread Bet on Forex
For example, let's say you are considering speculating on the EUR/USD rate, so you go on a spread betting website, like FinancialSpreads.com, and see the current market price at:
Here's what you need to know:
| Spread Betting Market: || EUR/USD Rolling Daily|
| Spread: ||$1.38000 - $1.38010|
| This Means: ||You can trade on the EUR/USD Rolling Daily market to move:
Above $1.38010, or
This is a 'Rolling Daily' trade which means that there is no settlement date. If you don't close your position, and the trading session ends, then your trade will automatically roll over into the next session.
If a trade is rolled over then you will normally either be charged or receive a small fee for overnight financing based upon whether you are speculating on the market to rise or fall.
For further details also see Rolling Spread Bets.
|Points Traded:|| Bets on the EUR/USD market are priced in £x per point.
Where a point is $0.00010 of the forex pair's price movement.
E.g. if EUR/USD moves $0.00350 then you would lose or win 35 multiples of your stake.
|Stake:|| You decide how much you would like to trade per point, e.g. £2 per point, £3 per point, £8 per point etc. |
|Quick Staking Exercise:|| If, as an example, you have a stake of £4 per point and EUR/USD changes by $0.00240 (24 points), you would lose / win £4 per point x 24 points = £96. |
Financial Spread Betting Example | Buying EUR/USD
Spread betting on the forex pair to rise - i.e. on the euro to get stronger
|You Decide Whether to Buy or Sell:
EUR/USD to push:
Above $1.38010? or
|Let's Assume You Decide to Buy: || Above $1.38010|
|You Select Your Stake Size, Selecting: ||£2 per point |
|What Happens Next? ||
- You make £2 for each point ($0.00010) the EUR/USD rate pushes above $1.38010
- You will make a loss of £2 for every point ($0.00010) the EUR/USD rate drops below $1.38010
|When You Buy a Spread Bet Your Trading Profits or Losses = ||(Final Price - Initial Price) x stake per point |
|Example 1 ||EUR/USD moves higher and the financial spread betting market is revised and changes to $1.38700 - $1.38710. |
|Time to Take a Profit? ||You could opt to leave your position open or close it, i.e. close your position to lock in a profit. In this example you choose to settle your trade by selling at $1.38700.|
|Your Trading Profits or Losses = ||(Final Price - Initial Price) x stake per point|
| ||($1.38700 - $1.38010) x £2 per point (£2 per $0.00010)|
| ||$0.00690 x £2 per point|
|69 points x £2 per point|
|Your Trading Profits or Losses = ||£138.00 profit|
|Example 2 ||EUR/USD pushes lower and the spread trading market adjusts and moves to $1.37389 - $1.37399. |
|Close and Restrict the Loss? ||At this point, you can decide to leave your trade open or close it in order to limit your losses. In this case you choose to close your trade and sell the market at $1.37389.|
|Your Trading Profits or Losses = ||(Final Price - Initial Price) x stake per point|
| ||($1.37389 - $1.38010) x £2 per point (£2 per $0.00010)|
| ||-$0.00621 x £2 per point |
|-62.1 points x £2 per point|
|Your Trading Profits or Losses = ||-£124.20 loss|
Fully Worked Spread Betting Example | Taking a Bearish View of EUR/USD
Spread betting on the forex pair to fall - i.e. on the euro to get weaker
|You Work Out Whether to Buy or Sell:
Above $1.38010? or
|Let's Say You Decide to Go Short:|| Below $1.38000|
|You Decide Your Stake Size, Let's Assume You Select: ||£3 per point|
|So Now What Happens?
- You will make a loss of £3 for every point ($0.00010) the EUR/USD rate rises higher than $1.38000
- You make £3 for every point ($0.00010) the EUR/USD rate goes lower than $1.38000
|When Speculating on a Market to Fall Your Trading Profits or Losses = ||(Initial Price - Final Price) x stake per point |
|Example 3 ||EUR/USD falls and the market is moved to $1.37611 - $1.37621.|
|Take a Profit? ||At this point, you may choose to leave your position open or close it, i.e. close your spread bet to lock in a profit. For this example, you decide to close your trade by buying the market at $1.37621.|
|Your Trading Profits or Losses = ||(Initial Price - Final Price) x stake per point |
| ||($1.38000 - $1.37621) x £3 per point (£3 per $0.00010) |
| ||$0.00379 x £3 per point|
|37.9 points x £3 per point|
|Your Trading Profits or Losses = ||£113.70 profit|
|Example 4 ||EUR/USD increases and the spread betting market is adjusted to $1.38332 - $1.38342.|
|Close and Limit the Loss?||At this point, you could choose to leave your trade open or close it and restrict your losses. In this instance you choose to settle your trade and buy at $1.38342.|
|Your P&L = ||(Initial Price - Final Price) x stake per point |
| ||($1.38000 - $1.38342) x £3 per point (£3 per $0.00010)|
| ||-$0.00342 x £3 per point|
|-34.2 points x £3 per point|
|Your P&L = ||-£102.60 loss|
- Financial spread trading market as per FinancialSpreads.com, 2 November 2011
- Many spread betting companies also let you spread bet on EUR/USD in euros/point and dollars/point
- Financial spread trading also allows you to speculate on the movement of a broad range of other markets, for more information please see:
Spread Betting on Forex - Technical Analysis
Many FX traders use technical indicators to gauge whether a given currency is likely to rise or fall against another currency. You can use Spreadex's charting software to draw support and resistance lines on different pairings to work out your trading strategy. Among the different signals traders look out for are Continuation Patterns and Reversal Patterns.
For today's forex technical analysis see:
- Continuation Patterns give indications of whether a trend has the capacity to continue its current direction. Typical examples of Continuation Patterns involve the formation of Pennants, Flags, Wedges and Triangles.
- Reversal Patterns give indications on the likelihood of a trend reversing. Typically this will involve the formation of Double Tops and Double Bottoms, Triple Tops and Triple Bottoms and Head and Shoulders Tops and Head and Shoulders Bottoms.
Forex Spread Betting Guides
Individual forex spread betting guides including worked trading examples for each market:
Spread Betting of Forex - Hedging
Forex spread betting can also be used as a hedging tool, for example, for a forthcoming holiday. Say, for example, you had booked a family holiday to the USA for later in the year and expected the pound to lose ground against the dollar.
Rather than changing money now and tying up capital, you could instead place a 'sell' spread bet on GBP/USD. Therefore any fall in value of the pound against the dollar in the intervening time period would be offset by the profit gained from your 'sell' spread bet.
A Review of the Forex Market
Although in theory you can trade on any international currency pairing, the vast majority of FX trading is carried out on the following major pairings: AUD/USD, EUR/GBP, EUR/JPY, EUR/USD, GBP/JPY, GBP/USD, NZD/USD, USD/CAD, USD/CHF and USD/JPY.
Note that it's not that easy to speculate on certain currencies. As of 2011, the Chinese Renminbi (aka Chinese Yuan and CNY) is not a free-floating currency. So even though China is the world's second largest economy, it is far from easy to take positions on any Renminbi based FX pairs.
According to the 2010 BIS forex survey;
- Global forex turnover was 20% higher in April 2010 than in April 2007. The average daily turnover rose to $4.0 trillion compared to $3.3 trillion.
- The increase was driven by the 48% growth in turnover of spot transactions, which represent 37% of forex market turnover. Spot turnover rose to $1.5 trillion in April 2010 from $1.0 trillion in April 2007. In forex spread betting terms, read 'spot' as a daily market rather than a futures markets.
- With regards to the counter-parties, the higher global forex market turnover is associated with the increased trading activity of "other financial institutions" - a category that includes, but is not limited to, non-reporting banks, pension funds, hedge funds, insurance companies, mutual funds and central banks. Turnover by this category grew by 42%, increasing to $1.9 trillion in April 2010 from $1.3 trillion in April 2007. For the first time, activity of reporting dealers with other financial institutions surpassed inter-dealer transactions (ie transactions between reporting dealers).
- The survey shows how EUR/USD, which commands 28% of all forex turnover, eclipses trade in all other currency pairs. USD/JPY accounts for 14% of activity and GBP/USD 9%. No other forex market accounts for more than 6% of the market.
- The percentage share of the US dollar has continued the slow decline witnessed since the April 2001 survey, while the Japanese yen and euro gained relative to April 2007.
Among the 10 most actively traded currencies, the Canadian and Australian dollars both increased market share, while the Swiss franc and pound sterling lost ground. The market share of emerging market currencies increased, with the biggest gains for the Korean won and Turkish lira.
- Forex trading activity became more global, with cross-border transactions representing 65% of trading activity in April 2010, while local transactions account for 35%.
- The relative ranking of forex trading centres has changed slightly from the previous survey. Banks located in the UK accounted for 36.7%, against 34.6% in 2007, of all forex market turnover, followed by the United States (18%), Japan (6%), Singapore (5%), Switzerland (5%), Hong Kong (5%) and Australia (4%).
Factors that can Influence the Forex Markets
There are many different factors which can influence the value of one currency against another specific currency, some of the key factors to consider include:
- Inflation - as a general rule, countries with consistently lower levels of inflation will experience a rising currency value and those with higher inflation typically see their currency fall in value against other trading currencies.
- Interest Rates - high interest rates can attract foreign capital if an opportunity exists for a higher return relative to other countries. This can therefore drive up the value of a currency. However note that high inflation can counteract this rise.
- Public Debt - countries with a large public debt can be less attractive to foreign investors by encouraging inflation. They also run the risk of defaulting on their debt obligations and as such they incur a poor credit rating. In turn, this can devalue a currency.
- Terms of Trade - linked to current accounts and a country's balance of payments, the terms of trade compare import prices to export prices. If the price of exports rises by more than that of imports, a country can see the value of its currency rise.
- Political Stability / Economic Performance - stable countries with a strong economic performance are more likely to attract foreign investment than less secure countries. Any political turmoil or instability will often result in a country's currency losing value.
Spread Betting of Forex - Groups
The currency markets are split into 3 groups:
- The Majors: The most active and widely traded currency pairs. For example, Euro/Dollar, Dollar/Yen and Euro/Sterling
- The Minors: The less active and less liquid currency pairs which are less popular than the Majors but more popular than Exotics. Example include the Pound/South African Rand, New Zealand Dollar/Swiss Franc and Dollar/Swedish Krona, Sterling/Canadian Dollar
- The Exotics: Foreign exchange pairs that are less broadly traded than any of the Major and Minor currencies. For example, Dollar/Czech Koruna, Sterling/Hungarian Forint, Dollar/Mexican Peso, Euro/Polish Zloty
With financial spread betting you can lose more than your original stake or investment. Spread betting carries a high level of risk to your capital. Please familiarise yourself with the risks that are involved and before trading, ensure that financial spread betting matches your investment objectives. Seek independent advice where necessary.
Spread Betting on Forex - edited by MJ, 17 May 2013.
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With spread betting you can lose more than your original stake or investment. Spread betting carries a high level of risk to your capital so please familiarise yourself with the risks that are involved and, before trading, ensure that spread betting matches your investment objectives. Seek independent advice where necessary.
* Based on current UK tax law. Tax law may change and can differ depending on your personal circumstances.