FX Spread Betting

FX Spread Betting
The CleanFinancial guide to FX spread betting.

FX Spread Betting Comparison

Each of the following companies offers a wide range of FX markets. Here we have listed an FX spread betting comparison table for some of the most popular markets.

Typical In-Hours Spread Sizes

EUR / USD Daily 0.7 1 0.7 0.7
GBP / USD Daily 1 1.5 0.9 0.9
EUR / GBP Daily 0.8 1.3 1.5 0.9
USD / JPY Daily 0.8 1 0.9 0.7
Forex – Minimum Stake £1 £1 £0.5 £1
Comparison Notes.

FX Spread Betting Account

The above companies tend to offer a wide range of FX, indices, shares and commodities markets.

Importantly, each of the above companies is authorised and regulated by the Financial Conduct Authority.

If you are looking to open a spread betting account then you can read a review of each company by clicking on the relevant company logo.

Please note that spread betting accounts are subject to status, terms and conditions.

Cryptocurrency FX Markets

Investors can also take a position on digital currencies like Bitcoin and Litecoin.

For more details see our Bitcoin and Litecoin trading guides.

Live FX Chart

This CFD trading chart offers a useful overview of the EUR/USD rate. You can also use the search option to access charts for more than 40 other FX markets.

The Plus 500 chart that we use above is typically based on the futures market.

If you’d like to look at live spread betting prices/charts, you may need a spread betting account.

A spreads account would also give you access to shorter term daily markets. Please note that all such accounts are normally dependent on suitability and status checks.

Of course, if you want to trade then, before starting, be aware that CFDs and financial spread betting carry a significant level of risk to your funds and can result in losses that exceed your initial deposit.

Below we have listed the companies that offer charts (these days most of the larger companies will offer these as a matter of course).

Candlestick Charts Financial Spreads City Index ETX Capital CMC Markets
Comparison Notes.

FX Trading Platforms, Software and Live FX Prices

Some spread betting companies offer users software / trading platforms that you need to download. However most companies, including the ones listed below, offer web based platforms.

A web based FX platform means that you don’t have to worry about installing new trading software. It also means that you can probably access your spread betting account from the office, from home and from most other places where you can access the internet.

Each of the following companies also offers account holders live prices.

Spread Betting Firm Live Prices?
City Index - Live Prices Live Spread Betting Prices
CMC Markets - Live Prices Live Spread Betting Prices
ETX Capital - Live Prices Live Spread Betting Prices
Financial Spreads - Live Prices Live Spread Betting Prices
Finspreads - Live Prices Live Spread Betting Prices
IG Index - Live Prices Live Spread Betting Prices
InterTrader - Live Prices Live Spread Betting Prices
Spreadex - Live Prices Live Spread Betting Prices
Tradefair - Live Prices Live Spread Betting Prices

Spread Betting Guides to Individual FX Pairs

On CleanFinancial we offer more than 50 reviews covering individual FX markets from the ‘majors’ to the ‘minors’ to the ‘exotics’.

For a more in-depth look at the most popular markets see:

Also see our guide to spread betting on the Chinese renminbi / trading the yuan.

FX Spread Betting – Free Demo Accounts

If you are looking to test out some new trading theories and ideas then it’s often wise to test them on a Demo Account / Test Account. These are free practice accounts where you can trial spread betting numerous spread betting markets, including FX rates like Sterling/Dollar, Euro/Dollar, Dollar/Yen etc, without risking any capital.

Demo Account Financial Spreads City Index ETX Capital CMC Markets
Comparison Notes.

How to Spread Bet on FX

As with a range of financial markets, an investor can place a spread bet on forex pairs, such as euro-sterling, to rise or fall.

Looking at a platform like Financial Spreads, you can see that they have put the euro-sterling Rolling Daily market at £0.80463 – £0.80473. This means you could spread bet on the euro-sterling pair:

  euro-sterling Spread Trading Example Rising above £0.80473, or
  euro-sterling Trading Example Falling below £0.80463

Whilst financial spread trading on euro-sterling you trade in £x per point where a point is £0.00010 of the pairs movement. As a result, if you decided to have a stake of £5 per point and euro-sterling moves 22.0 points then that would be a difference to your bottom line of £110. £5 per point x £0.00220 = £5 per point x 22.0 points = £110.

Rolling Daily FX Markets

One thing to note is that this is a Rolling Daily Market which means that it does not have a set closing date. You do not have to close your trade, should it still be open at the end of the trading day, it will simply roll over to the next session.

If you allow your FX bet to roll over then you are normally charged a small financing fee. If you would like a fully worked example then see Rolling Daily Spread Betting.

FX Spread Betting Example

If you think about the spread of £0.80463 – £0.80473 and assume:

  • You’ve completed your forex market research, and
  • You think the euro-sterling rate will rise higher than £0.80473
Then you might choose to go long of the market at £0.80473 and invest, for the sake of argument, £4 per point.

With such a spread bet you win £4 for every point (£0.00010) that the euro-sterling rate increases above £0.80473. Nevertheless, it also means that you will lose £4 for every point that the euro-sterling market falls below £0.80473.

Looked at another way, if you buy a spread bet then your P&L is found by taking the difference between the settlement price of the market and the price you bought the spread at. You then multiply that difference in price by your stake.

If after a few days the FX rate started to increase then you might want to close your trade in order to guarantee your profit.

Taking this a step further, if the market did go up then the spread, determined by the spread betting company, could be adjusted to £0.80791 – £0.80801. You would close your trade by selling at £0.80791. Therefore, with the same £4 stake your profit would be:

Profit / loss = (Final Price – Initial Price) x stake
Profit / loss = (£0.80791 – £0.80473) x £4 per point stake
Profit / loss = £0.00318 x £4 per point stake
Profit / loss = 31.8 points x £4 per point stake
Profit / loss = £127.20 profit

Speculating on FX, whether by spread betting or otherwise, can go against you. In this example, you wanted the forex rate to rise. Nevertheless, the FX rate might fall.

If the euro-sterling market weakened, against your expectations, then you might decide to settle/close your spread bet to stop any further losses.

Should the spread pull back to £0.80199 – £0.80209 you would close your position by selling at £0.80199. That would mean you would lose:

Profit / loss = (Final Price – Initial Price) x stake
Profit / loss = (£0.80199 – £0.80473) x £4 per point stake
Profit / loss = -£0.00274 x £4 per point stake
Profit / loss = -27.4 points x £4 per point stake
Profit / loss = -£109.60 loss

Note – euro-sterling Rolling Daily currency market accurate as of 25-Oct-12.

FX Spread Betting – Fundamental Analysis and Technical Analysis

Fundamental analysis is employed by numerous FX traders. It boils down to determining a security’s price by considering all the relevant economic and financial data as well as other qualitative factors.

For example, if you were trying to determine a share’s fair value then you would concentrate on fundamental factors that alter an organisation’s actual performance and its future prospects. As you would expect, a lot of this is predicated on the firm’s annual reports, however, it is also dependent on a range of external factors. Once a fair value is established a trader can work out whether they should buy or sell the shares.

To help you with your fundamental analysis of the FX markets we have a series of daily articles looking at the FX markets eg please see the articles listed in the FX Trading News section above.

Given that the FX markets are so vast and have so many influencing factors many traders prefer to use a mixture of fundamental analysis and technical analysis when they are evaluating markets.

Technical analysis is based on spotting price movements in historical trends. It’s purely numbers based and so FX charts are crucial.

With technical analysis, the rationale is that all of the critical information is actually built into the price of the market.

Therefore, an investor does not have to go through the financial reports, market information, economic news etc simply because such aspects are, in theory, reflected in the current level of the market.

Nevertheless, while this analysis can be relatively quick and useful, there is a major drawback. This type of analysis is predicated on historical data. Just because the particular forex rate has been falling, that doesn’t necessarily mean that the rate will continue to fall.

Please note that Clean Financial offers daily FX technical analysis.

Forex Guide to Technical Analysis

Many traders use technical analysis to predict whether a market is likely to rise or fall.

Companies like Spreadex and Financial Spreads offer free charting tools to help show Support and Resistance levels for different pairs.

There are a range of different signals that traders look out for including Reversal Patterns and Continuation Patterns.

  • Reversal Patterns – these indicate the likelihood of a given trend reversing and typically involve the formation of:

    • Head and Shoulders (Tops)
    • Head and Shoulders (Bottoms)
    • Double Tops
    • Double Bottoms
    • Triple Tops
    • Triple Bottoms

  • Continuation Patterns – these indicate whether a trend is likely to continue its current levels of momentum. Typical examples include the formation of:

    • Flags
    • Pennants
    • Triangles
    • Wedges.

Factors that Influence the FX Markets

Some of the variables that have the most significant impact on the FX markets include interest rate changes, rising/falling inflation and, by extension, any central bank decisions or announcements.

FX markets are traded in pairs so, for example, you could buy/sell the Dollar against the Euro as the values of the currencies diverge.

It is worth noting that the demand for a currency is often based upon interest rates. Higher rates often, although not always, will make a certain currency more attractive.

The central banks, such as the ECB, Bank of England and US Federal Reserve, normally set interest rate levels. For that reason they have a major influence on the FX markets.

A central bank could also flood the FX markets with its country’s domestic currency in an attempt to reduce the value of it. Quantitative easing is a common example of this. The opposite would be large scale purchasing of its domestic currency in order to try to raise its value.

Note also that if a country becomes politically unstable, its domestic currency can drop in value as traders lose faith in the national government’s ability to successfully support a healthy economy.

Conversely, a nation recovering from a phase of instability can certainly become more appealing to traders. This can increase the value of their domestic currency. Increasing or falling jobs figures can also influence the foreign exchange market.

You should also note that the forex spread betting markets are also influenced by investor sentiment. This essentially means that investors trading the FX spread betting markets can become either more or less positive, with sentiment spreading to such a degree that it will start to impact on buying and selling actions.

FX Trading Risks