Difference Between Spread Betting & CFD Trading | CMC Markets

I am new to both, but I have a feeling that the mechanics of forex trading and forex spread betting are very similar? Yes, you got it right. Spread trading is technically speaking a form of gambling as opposed to investing.

However, you cannot write off losses against tax where you can with trading accounts. In fact many retail FX brokers are little different to spread betting providers, because most make their money from the spread difference in buying and selling price. If you ever get into shares, then you can think about CFDs.

Spread Betting vs. Forex Trading

There are FX brokers who make their money by charging you commission on your trade value — they mostly have either what is called an ECN system or operate a Currenex platform. In most other areas forex spread betting is very similar to forex trading — both are margin traded instruments and both financial products allow you to take long or short positions.

One difference is that with spread trading, the underlying asset is never owned. In a nutshell this means that a spread trader never owns the underlying currency he has purchased; he is simply betting on the price movement, not gaining from a change in the price of currency he has acquired.

The spreadbetting provider is offering the same product really as the Forex brokerage company. The only difference is how they handle the actual trade placed with them. The only reason I can see for choosing forex trading over spread betting is to use Meta Trader 4 and Expert Advisers.

With spread betting you can bet on indices, stocks, energy markets, precious metals, etc. Apart from that, forex trading and forex spread betting are very much similar and trades tend to have the same margin requirements. One minor difference is that the rollover for overnight positions is charged as a separate fee on a spreadbet, but is included in the price for spot forex which is why the quotes differ slightly.

Having said all that, forex trading and spreads are quite similar these days and the analysis and technicals involved in predicting how the foreign exchange markets move apply equally to both instruments. In other words if you are able to trade currencies profitably you should also be successful with spreads. About Privacy Policy Risk Warning Contact.

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