Forex Spread Trading
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A guide to Forex Spread Trading including a comparison of the key financial markets and where you can trade:
Where Can I Open a Forex Spread Trading Account?
Many spread trading companies provide access to thousands of international markets including a wide variety of major, minor and exotic forex spread trading markets.
Some firms, such as FinancialSpreads, provide the usual benefits of spread trading such as 24 hour trading, no commissions, no broker’s fees and tax free trading*.
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| GBP / USD Daily - Spread Size |
2 |
2 |
2 |
3 |
0.8 |
2 |
3 |
2 |
| GBP / USD Daily - Min Stake |
£1 |
£0.50 |
£1 |
£0.5 |
£1 |
£1 |
£1 |
£1 |
| GBP / USD Future - Spread Size |
8 |
12 |
8 |
8 |
- |
8 |
16 |
8 |
| GBP / USD Future - Min Stake |
£1 |
£1 |
£1 |
£1 |
- |
£1 |
£1 |
£1 |
| EUR / GBP Daily - Spread Size |
1 |
2 |
1 |
1 |
1 |
1 |
2 |
1 |
| EUR / GBP Daily - Min Stake |
£1 |
£0.50 |
£1 |
£0.5 |
£1 |
£1 |
£1 |
£1 |
| EUR / GBP Future - Spread Size |
6 |
10 |
6 |
6 |
- |
6 |
17 |
6 |
| EUR / GBP Future - Min Stake |
£1 |
£1 |
£1 |
£0.5 |
- |
£1 |
£1 |
£1 |
| EUR / USD Daily - Spread Size |
1 |
1 |
1 |
2 |
0.8 |
1 |
2 |
1 |
| EUR / USD Daily - Min Stake |
£1 |
£0.50 |
£1 |
£0.5 |
£1 |
£1 |
£1 |
£1 |
| EUR / USD Future - Spread Size |
8 |
12 |
8 |
8 |
3 |
8 |
12 |
8 |
| EUR / USD Future - Min Stake |
£1 |
£1 |
£1 |
£1 |
£1 |
£1 |
£1 |
£1 |
| USD / JPY Daily - Spread Size |
1 |
1 |
1 |
2 |
0.8 |
1 |
2 |
1 |
| USD / JPY Daily - Min Stake |
£1 |
£0.50 |
£1 |
£0.5 |
£1 |
£1 |
£1 |
£1 |
| USD / JPY Future - Spread Size |
8 |
12 |
8 |
10 |
- |
8 |
14 |
8 |
| USD / JPY Future - Min Stake |
£1 |
£1 |
£1 |
£0.5 |
- |
£1 |
£1 |
£1 |
Comparison Notes
Benefits of Forex Spread Trading
- The simple range of markets makes spread trading an option that investors should consider. Most spread trading companies offer the popular forex pairs as well as a variety of other markets that can span from shares and stock market indices all the way to commodities like Gold, Oil and Coffee.
- In contrast with more traditional share trading, you can take short positions on a market. As a result, if you think the Euro/Dollar rate will go up then you can speculate on it to move higher. Conversely, if your research makes you think that the Euro/Sterling rate is going to weaken then you can speculate on the market to go down.
- You don’t buy or sell any actual currency, assets or resources; you simply speculate on the future value of a given market. As a result, forex spread trading is not subject to capital gains, stamp duty or income tax*.
- If you speculate on forex then you usually have to pay commissions. With forex spread trading, your trades do not incur any such fees.
Where Can I Find Forex Spread Trading Charts?
If you are looking for historical data then companies like Financial Spreads offer a range of live charting tools including candlestick charts where you can apply a variety of moving averages as well as Bollinger bands.
You are able to alter the charts to see the data over various time scales including minutes, hours, days or even weeks in order to show the market movements over a time period to suit your investment style.
Forex Spread Trading Companies – Account Services Comparison
All of the companies listed below offer the normal benefits of spread trading such as a wide range of markets, two way trading, tax free trading* and zero commissions.
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| Online Application |
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| Credit Account |
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| Deposit Account |
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| Stop Loss Available |
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| Automatic Stop Loss |
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| 24 Hour Trading |
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| FSA Authorised and Regulated |
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| Candlestick Charts |
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Comparison Notes
Forex Spread Trading and Risk Management
Before we proceed it should be pointed out that, as with all forms of investment, there is a downside to spread trading and you can lose more than your initial stake.
You might find it helpful to note a few other points which the following risk notice covers, "Please ensure that spread trading matches your investment requirements. Familiarise yourself with the risks that are involved. Spread trades do carry a high level of risk to your capital. If necessary, seek independent advice".
That said, you are able to add a limit to the size of your position which can reduce your losses without impacting your upside. You could also make use of smaller stake sizes such as £1 per point or $1 per point.
To gain some exposure you could trade the major forex pairs, ie speculate on whether the Euro/Dollar, Sterling/Dollar, Sterling/Euro etc will go up or down.
As a result you might decide to speculate on the Euro/Dollar and, as we have said, you can trade £1 per point or $1 per point etc. With the Euro/Dollar market a point is $0.0001.
If you decide to speculate that the Euro/Dollar will go up, with a £1 per point stake, and it goes up by $0.0120 then you would make $0.0120 x £1 per $0.0001 = 120 points x £1 per point = £120.
Note that you can trade the markets in Dollars, Sterling or Euros. If you want to trade in Euros then $0.0120 x €1 per $0.0001 = 120 points x €1 per point = €120.
Of course, should the market move against you, dropping by say $0.0090, then with a £1 stake you would lose $0.0090 x £1 per $0.0001 = 90 points x £1 per point = £90.
That would not be a great start. However, with spread trading companies like Shorts and Longs you can add a Guaranteed Stop Loss at let's say $0.0030, or 30 points.
If you were spread trading on the Euro/Dollar then your position would be closed if the Euro/Dollar moved against you by $0.0030. Therefore, instead of losing £90, you'd only lose $0.0030 x £1 per $0.0001 = 30 points x £1 per point = £30.
Of course, if you correctly predicted the direction of the market then your profit would still be £120 if it moved up by $0.0120 or £60 if the Euro/Dollar moved up by $0.0060.
For some fully worked forex spread trading examples please also see:
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Financial Spreads
"With FinancialSpreads.com you get all the normal
advantages of Spread Trading plus commission free trading on 2,000+ markets, 24 hour trading and..." read
Financial Spreads review.
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Risk Warning: Spread trading carries a high level of risk to your capital. You may lose more than your initial investment. It may not be suitable for all investors. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved and seek independent financial advice where necessary.
'Forex Spread Trading' by DB, updated 26-Jan-12
For related pages also see:
Index Spread Trading, updated 26-Jan-12
Index Spread Trading - Where to open an Indices Spread Trading account, where to find Index spread trading charts, Indices risk management tips, stock market index spread trading examples and...read article: Index Spread Trading.
Commodities Spread Trading, updated 26-Jan-12
Commodities Spread Trading - Where to open a Commodities Spread Trading account, where to find Commodity spread trading charts, Commodities risk management tips, Commodities examples and...read article: Commodities Spread Trading.
Financial Spread Trading, updated 26-Jan-12
Financial Spread Trading - A look at where you can open a financial spread trading account, where to get live financial spread trading charts, risk management tips, spread trading examples and...read article: Financial Spread Trading.
Forex Spread Trading, updated 26-Jan-12
Forex Spread Trading - A look at where you can open a forex spread trading account, where to get live forex charts, forex risk management tips, trading examples and...read article: Forex Spread Trading.
FTSE Futures, updated 30-Jan-12
FTSE futures. Where to find FTSE real-time prices and charts, how to trade the FTSE index and the most popular stock market futures questions on FTSE plus...read article: FTSE Futures.
Dow Futures, updated 30-Jan-12
Dow futures. Where to find Dow real-time prices and charts, how to trade the Dow index and the most popular stock market futures questions on Dow plus...read article: Dow Futures.
S&P 500 Futures, updated 30-Jan-12
S&P 500 futures. Where to find S&P 500 real-time prices and charts, how to trade the S&P 500 index and the most popular stock market futures questions on S&P 500 plus...read article: S&P 500 Futures.
DAX Futures, updated 30-Jan-12
DAX futures. Where to find DAX real-time prices and charts, how to trade the DAX index and the most popular stock market futures questions on DAX plus...read article: DAX Futures.
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