Trading Forex Using Spread Betting
Trading forex using spread betting – Forex trading is a huge market, operating almost around the clock. Spread betting offers access to these markets via familiar platforms. So how can someone start? This article will explain.
Breaking into the world of investing, whether through forex trading or stocks and shares trading, used to require a significant amount of capital, the right connections, and someone willing to show you the ropes.
Today, you can find everything you need to start investing online, and you can start trading with as much or as little money as you like.
Forex Spread Betting Brokers
#1 - AvaTrade
Why We Chose AvaTrade
AvaTrade continues to offer spread betting for UK traders via the MT5 platform, with zero tax on profits. There are no extra currency conversion fees on any asset and leverage is available up to 1:30. You can also practice in the free demo account.
"AvaTrade offers the full package for short-term traders. There is powerful charting software, reliable execution, transparent fees, and fast account opening with a low minimum deposit."
- DayTrading Review Team
- Instruments: CFDs, Forex, Stocks, Indices, Commodities, ETFs, Bonds, Crypto, Spread Betting
- Regulator: ASIC, CySEC, FSCA, ISA, CBol, FSA, FSRA, BVI, ADGM
- Platforms: WebTrader, AvaTradeGO, AvaOptions, MT4, MT5, AlgoTrader, TradingCentral, DupliTrade
- Minimum Trade: 0.01 Lots
- Leverage: 1:30 (Retail) 1:400 (Pro)
About AvaTrade
AvaTrade is a leading forex and CFD broker, established in 2006 and regulated across 9 jurisdictions. Over 400,000 users have signed up with the broker which processes over 2 million trades each month. The firm offers multiple trading platforms, including MT4, MT5, and a proprietary WebTrader. 1250+ financial instruments are available for day trading, alongside a comprehensive education center and multilingual customer support.
Pros
- The broker’s unique risk management tool, AvaProtect, protects against losses up to $1 million and is easy to activate in the platform
- AvaTrade is a heavily regulated and trustworthy broker with licenses from the ASIC, CySEC and more
- Automated trading is supported through MetaTrader Expert Advisors (EAs), as well as the AvaSocial and DupliTrade tools
Cons
- A high $2000 minimum investment is required to use DupliTrade, which will be out of reach for many beginners
- Traders from the US are not accepted
- There’s an above-average $50 inactivity fee after three months, though this won't impact active day traders
#2 - Pepperstone
Why We Chose Pepperstone
Pepperstone extends financial spread betting services to both retail and professional traders, enabling you to speculate on forex, indices, shares, and more. Additionally, Pepperstone offers comprehensive training resources if you are new to spread betting, helping to facilitate your journey into this tax-efficient form of trading. Pepperstone also now offers spread betting on TradingView, making it one of a handful of brokers that provide this service.
"Pepperstone stands out as a top choice for day trading, offering razor-sharp spreads, ultra-fast execution, and advanced charting platforms for experienced traders. New traders are also welcomed with no minimum deposit, extensive educational resources, and exceptional 24/7 support."
- DayTrading Review Team
- Instruments: CFDs, Forex, Currency Indices, Stocks, Indices, Commodities, ETFs, Crypto, Spread Betting
- Regulator: FCA, ASIC, CySEC, DFSA, CMA, BaFin, SCB
- Platforms: MT4, MT5, cTrader, TradingView, AutoChartist, DupliTrade
- Minimum Deposit: $0
- Minimum Trade: 0.01 Lots
- Leverage: 1:30 (Retail), 1:500 (Pro)
About Pepperstone
Established in Australia in 2010, Pepperstone is a top-rated forex and CFD broker with over 400,000 clients worldwide. It offers access to 1,300+ instruments on leading platforms MT4, MT5, cTrader and TradingView, maintaining low, transparent fees. Pepperstone is also regulated by trusted authorities like the FCA, ASIC, and CySEC, ensuring a secure environment for day traders at all levels.
Pros
- Pepperstone boasts impressive execution speeds, averaging around 30ms, facilitating fast order processing and execution that’s ideal for day trading.
- Award-winning customer support is available via telephone, email or live chat with response times of <5 minutes during testing.
- Pepperstone emerges as a low-cost broker, especially for serious day traders with spreads from 0.0 in the Razor account and rebates of 25%+ through the Active Trader program.
Cons
- Pepperstone’s demo accounts are active for only 30 days, which may not be not long enough to familiarize yourself with the different platforms and test trading strategies.
- Despite enhancements to its range of markets, crypto offerings are relatively limited compared to other brokers such as eToro, with no option to invest in real coins.
- Pepperstone does not support cTrader Copy, a popular copy trading feature built into the excellent cTrader platform and available at alternatives like IC Markets.
#3 - CityIndex
Why We Chose CityIndex
Spread bet on thousands of global markets with no commissions and tight, fixed spreads.
"City Index is best for new and intermediate traders looking for a wide selection of assets on user-friendly platforms."
- DayTrading Review Team
- Instruments: CFDs, Forex, Stocks, Cryptos, Options, Commodities, Bonds
- Regulator: ASIC, FCA, MAS
- Platforms: MT4, TradingView, TradingCentral
- Minimum Deposit: $0
- Minimum Trade: 0.01 Lots
- Leverage: 1:30 (Retail), 1:50 (Accredited Investor), 1:200 (Sophisticated Investor), 1:300 (Wholesale Investor), 1:400 (Professional Trader). Varies with jurisdiction.
About CityIndex
City Index is an established and award-winning forex, CFD and spread betting broker with top-tier global regulation, including in the UK (FCA) and Australia (ASIC). With 30+ years in the industry, 13,500+ instruments and 24/5 customer support, City Index is a solid pick for aspiring traders.
Pros
- A free demo account with unrestricted access to all markets and trading tools
- Industry-leading platforms including MT4, plus access to cutting-edge third-party tools like TradingView
- Tight spreads from 0.5 pips on EUR/USD and competitive commissions on CFD shares
Cons
- No Islamic account for Muslim traders
- $15 monthly inactivity fee
- US traders not accepted
#4 - Spreadex
Why We Chose Spreadex
Trade on thousands of financial markets with a bet size from £0.01 and the best margin rates in the industry. Spread bets are tax free in the UK, and Spreadex traders can access the markets via three slick proprietary trading platforms.
"Spreadex will appeal to UK day traders who are interested in both spread betting on financial markets and placing traditional bets on sports events. Fees are low on short trades and profits are tax-free on spread bets. There's also a powerful proprietary charting platform, plus £0 minimum deposit required to get started. "
- DayTrading Review Team
- Instruments: Forex, CFDs, Indices, Commodities, Stocks, Crypto, Bonds, Interest Rates, ETFs, Options, Spread Betting
- Regulator: FCA
- Platforms: Spreadex Platform, TradingView
- Minimum Deposit: £0
- Minimum Trade: £0.01
- Leverage: 1:30
About Spreadex
Spreadex is an FCA-regulated broker that offers spread betting opportunities on an impressive 10,000+ CFD instruments including 60 forex pairs. Traders can also take short-term positions on sporting events. The brand has been around for over 20 years and has won multiple awards.
Pros
- A rare broker that provides access to lower market cap stocks traded on the AIM
- There's an excellent range of instruments and trading vehicles for short-term traders
- The broker offers an easy-to-use proprietary charting platform and mobile app
Cons
- No third-party e-wallets are accepted
- The proprietary terminal lacks comprehensive charting features of platforms like MT4 and MT5
- The limited customer service can make it time-consuming to troubleshoot problems
#5 - Trade Nation
Why We Chose Trade Nation
Trade Nation offers competitive spread betting conditions and transparent fees on hundreds of assets. On the proprietary platform, spread betters also enjoy a user-friendly and customisable interface.
"Trade Nation is a good choice for newer traders looking for a wide range of financial markets on a user-friendly platform. There is no minimum deposit, free funding options and strong education."
- DayTrading Review Team
- Instruments: Forex, CFDs, Indices, Shares, Commodities, Futures, Bonds, Cryptos (Bahamas Entity Only)
- Regulator: FCA, ASIC, FSCA, SCB, FSA
- Platforms: MT4
- Minimum Deposit: $0
- Minimum Trade: 0.1 Lots
- Leverage: 1:500 (entity dependent)
About Trade Nation
Trade Nation is a top FX and CFD broker regulated in multiple jurisdictions including the UK and Australia. The firm offers low-cost fixed and variable spreads on 1000+ assets with robust trading platforms and training materials. The Signal Centre can also be used for trade ideas.
Pros
- There is a low minimum deposit for beginners
- Multiple account currencies are accepted for global traders
- Full range of investments via leveraged CFDs for long and short opportunities
Cons
- Fewer legal protections with offshore entity
One of the first and most important lessons that any new trader learns is that assets and financial instruments can go up or down in value; you can never guarantee what will happen.
Because every investment an investor makes comes with a degree of inherent risk, a successful trading strategy will seek to mitigate this risk in several ways.
Risk mitigation strategies vary depending on the type of trade you are making.
In this guide, we look at what forex spread betting is, some of the best forex spread betting companies to place trades with, and some tips to help you mitigate the risk when using spread betting to trade forex.
What Is Spread Betting?
Spread betting is a form of market speculation, whereby traders speculate (bet) on the direction a financial market will take (increasing or decreasing in value) without ever owning the underlying security.
Instead of buying a security at an advantageous time and selling it when it is worth more, the trader is betting on whether that security will increase or decrease in value.
There are two important numbers traders need to know when spread betting; the bid and the ask price, sometimes known as the spread. When investors place a spread bet, they bet whether the price of a security will end up lower than the bid or higher than the ask.
Benefits
- Spread betting makes short selling much simpler. If an investor wants to short physical shares, they will have to borrow the stock they want to short sell. This can be time-consuming and costly, whereas placing a spread bet is as easy as buying any security.
- In most cases, there are no commissions to pay on spread bets. Spread betting companies make their money through the spread they offer, rather than charging traders a commission fee. This makes it easier to stay on top of your trading costs.
- Some jurisdictions, including the UK, class spread betting as gambling. This means that any gains you make will be tax-free.
Using Spread Betting To Trade Forex
Forex spread betting uses the principles of spread betting and applies them to the forex market.
Investors bet on the price movement of currency pairs rather than securities. As with regular spread betting, traders will be quoted a bid and ask price by the company offering currency spread betting.
They then have to decide whether they think the currency pair’s price will end up lower than the bid or higher than the ask.
The difference between the bid and the ask is the spread. The narrower this difference is, the more attractive the currency pair is. A narrower spread means lower transaction costs and greater profits.
Leverage
One of the key advantages of forex spread betting is that it enables traders to harness the concept of leverage when they place a trade.
Leverage means that the brokerage firm or platform processing the trade lends the investor the funds they need.
Instead of covering the full costs of the spread bet, investors only need to meet the margin requirements. The margin will be a percentage of the overall value of the bet.
As long as the investor can afford this, they can leverage the rest of what they need from the broker.
As with regular spread betting, forex traders using spread betting do not ever own the currencies they bet on. They are speculating on price movements.
Forex Spread Betting Tips
- Before you even think about placing a spread bet on the forex market, make sure that you fully understand what spread betting means and what you are doing. As with any investment or trading opportunity; the more you know beforehand, the better prepared you will be.
- Forex spread betting is regarded as gambling in the UK, like other forms of spread betting. But that doesn’t mean there’s no strategy to it or that it all comes down to random chance. Before you start spread betting, it is worth taking the time to learn about the factors that impact currency valuations and can affect the relative values of currency pairs.
- Consider putting together a formal trading plan that sets out how you will approach the forex market and how you will evaluate potential spread bets before you place them.
- Take sensible risk management precautions. You should never invest or bet money that you can’t afford to lose. Before you start trading, you need to know exactly how much capital you have available and how much you can afford to spend and lose.
Set yourself firm limits and make sure you don’t exceed them. You should also read up on stop-loss orders; these are one of the most important risk management tools available for when the markets aren’t going your way.
Spread betting provides a simple and straightforward method for trading on the forex market.
By cutting commissions out of the equation, taking advantage of leverage, and generating tax-exempt gains, spread betting enables you to maximize the returns you make on your investment.