FxBrokerReviews.org – Spread betting is a form of currency trading in the forex market, but without actually buying or selling the assets. In spread betting a specific bet is made per point instead of owning some amount of a currency pair instrument. Traders make profits if the forex currency pair moves in the same direction as the bet and on the other hand if the price movement is in the opposite direction of the bet, then a trader incurs losses.
Spread betting Forex trading is very popular in the UK as it is exempt from taxation. At the same time, it is illegal in countries like the United States. Due to this reason spreading betting has gained a lot of attraction by traders in the UK, they look at it as an easy and reliable way to earn profits.
The downside of this is that the forex market is cramped with many spread betting sites, offering their services which can be quite confusing, especially for new traders. Therefore, this guide covers the best forex brokers for spread betting in the UK, to help you make your way to the forex market.
Also read: Best Low Spread Forex Broker UK Reviewed
What is Spread betting?
Spread betting is different from traditional buy-and-hold investment. The financial derivative allows traders to speculate and monitor the price movements of an asset without having to buy or sell it. Traders can place bets on various financial instruments in the forex market like forex, indices, commodities, or shares without taking ownership of the underlying asset.
Unlike, forex trading the profits or losses are calculated by multiplying the size of the bet by the unit of movement of the asset. The bet size is the amount of money you bet per unit of movement. The unit of movement is measured in points or pips.
Spread betting is a lot similar to CFDs but unlike CFDs which have a fixed expiration date spread spreads bets only have a duration of between one day and a few months. Traders can choose to close these bets whenever they want.
Also read: A Complete Guide on CFD Trading: Is It A Good Option for Beginners?
What is a spread betting forex broker?
To start spread betting in the forex market, you will require a broker that supports spread betting. A spread betting broker enables traders to place bids on the rise or fall of the value of the underlying assets. A broker might allow placing bids either through their platform or through some third-party platforms like the MT4, webtrader, MT5, or more.
Trading through a spread betting broker allows you to place bids o various financial instruments like stocks, indices, commodities, precious metals, forex, and even cryptocurrencies. While you can find numerous spread betting sites and brokers in the forex market, you should look for a broker who is :
- Regulated
- Has a wide range of asset offerings
- Has low trading fees and is commission free
- Assists and has educational resources
- Offers technical tools and indicators to monitor the price movements.
Best forex brokers for spread betting
Our reviews are based upon testing each broker, on various factors like placing a bet, asset offerings, and a spread betting comparison of the fees charged by the forex brokers.
Here are some of the best spread betting brokers in the UK 2022
- IG – overall best forex spread betting broker
- Interactive brokers – best spread betting broker with low trading fees
- Vantage – best spread betting broker app
A detailed review of the best spread betting forex brokers
1. IG – overall best forex spread betting broker
IG is considered to be one of the best forex brokers in the UK for all kinds of traders. It allows traders to spread bet on more than 18,000 markets. The platform only charges the spread when a position is opened. What is impressive about IG is that the spreads can be as low as 0.6 pips for FX trading and 0.1 points for shares.
The platform charges low trading fees and also offers tight spreads. IG is also a heavily regulated platform and is looked after by the FCA and BaFin. The platform also allows traders to place bets through the MT4 trading platform.
Why Choose IG?
- Quality of educational resources and tutorials
- Offers MT4 and Webtrader
- Low trading fees and tight spreads
2. Interactive brokers- best spread betting broker with low trading fees
Interactive Brokers spread betting attracts a lot of traders due to its low per-share pricing and a large selection of tradable securities, including stocks, commodities, forex, indices, and more. the broker is considered an advanced trading platform and offers low margin rates to all its traders. Moreover, the broker app IBKR Lite offers commission-free trades of stocks and ETFs.
The broker is regulated by several financial authorities globally, including the UK’s Financial Conduct Authority (FCA) and the US Securities and Exchange Commission (SEC). Interactive spread betting platform is also hugely popular as it offers tight spreads and commission-free trading.
Why Interactive brokers?
- Heavily regulated platform
- Has a lot of educational resources for advanced traders
- Low trading forex broker with tight spreads
3. Vantage Markets – best spread betting app
Vantage is an Australia-based forex broker that offers one of the best spread betting apps in the UK. the platform offers up to 30:1 leverage when spread betting. It also uses an ECN spreads system, due to which the spreads are quite low. On specific instruments, the spreads can be as low as 0.0 pips.
The broker is heavily regulated by ASIC and the FCA. It offers commission-free trading on a wide range of assets, including over 44 forex pairs, CFDs, cryptocurrency, shares, commodities, and indices. The spread betting platform also supports third-party trading platforms like MT4, MT5, and a mobile app.
Why choose Vantage?
- Offers commission-free trading
- Has tight spreads as low as 0.0 pips
- Heavily regulated by the FCA and ASIC
- Supports MT4 and MT5
Understanding the components of spread betting
To start spread betting forex trading, you need to understand the various terms associated with it. Take a look at some of the components of spread betting :
What is spread?
Spread is simply defined as the difference between the bid(buy) price and the ask (sell) price. Spreads in the forex market are measured in pips, which is the smallest unit of the price movement of a currency pair. As a forex trader, you should look for spread betting brokers that offer low and tight spreads. Lower the spreads, lower the percentage of profit you have to share with your forex broker. See a list of all the lowest spread forex brokers here.
What is leverage in spread betting?
Leverage refers to a substantial amount of money that you have borrowed from your broker. It is typically compared to a loan taken from your forex broker to trade asset values you can’t afford at that time. Here, it is important to note that as good as leverage sounds, it can be quite risky in spread betting. Leverage magnifies both profits and losses as these are calculated based on the full value of the position, not just the initial deposit. So if the bet that you have placed goes in the opposite direction, while you are trading with leverage, you can incur significant losses.
What is margin in spread betting?
Margin is the amount of money you need to have in your account to open a leveraged position. Margin covers you against the losses in your trade. So, when you spread bet, you submit a small initial deposit, with your forex broker – known as the margin, to open a position. This is why leveraged trading is sometimes referred to as ‘trading on margin’.
There are two types of margins involved in spread betting:
- Deposit margin: This is said to be the initial funding required by the trader to open a position, which is usually presented as a percentage of a trader’s total trade.
- Maintenance margin: These are the additional funds that might be required if the open position starts to incur losses that are not covered by the initial deposit. If this situation arises, traders get a warning known as a margin call – asking you to either increase the funds or take the risk of having your position closed.
What is bet size?
The bet size is the amount you want to bet on the underlying market asset. Traders have the choice to choose their bet size as long as it meets the minimum accepted by the forex broker. The profit or loss, earned in spread betting is calculated as the difference between the opening price and the closing price of the market, multiplied by the value of the bet value placed by the trader.
What is bet duration?
As the name suggests, bet duration refers to the time you can hold your bet, till it expires. Usually spread bets last for days or a few months. Spread betting sites offers traders to either place quarterly bets or daily funded bets. Quarterly bets are futures bets that expire at the end of a quarterly period, which can be renewed if the trader wishes to. Whereas daily funded bets run for as long as a trader chooses to keep them open. However, they do have a default expiry in the distant future.
Can you spread bet forex?
Yes, several spread-betting forex brokers allow traders to easily place bets on forex trade. Here is how you can place a bet on forex
- From the range of assets provided by your broker, choose an asset that you want to bet on.
- After, choosing the asset select buy or sell. Here, buying does not mean the ownership of the asset. If you think the price will rise, you have to choose “buy.” But if you think the price will fall, choose “sell.”
- Select the bet size and choose how much money you want to risk per unit of movement.
- Add a stop loss or take profit. A stop-loss automatically closes the spread bet if it falls under a certain price.
- Lastly, you need to monitor the trade. You can close your bet at any time you feel satisfied with your profits.
How does spread betting work in the forex market? : Tips for Spread betting
To increase the chances of getting high returns in spread betting, you need to take certain strategies and points. Here are a few tips on how to spread bets to get profits:
Research the market before placing the spread bets
The most important step, to attaining profits in forex trading is market research. It is the key to placing successful trades, and you should not overlook this step. If you are new to the market, then you can take the help of various spread betting sites and brokers that can provide you with market information and give you knowledge about which asset you should place your bets on.
Make use of the demo account
Demo accounts are a great way to learn some strategies and experience in spread betting. It does not involve actual money so it is completely risk-free. Demo accounts are also the best way to gain trading experience without risking your money. After you gain experience on a demo account, you can place a few small spread bets on a live trading account.
Choose small bet sizes
To start with spread betting, choose small bet sizes. Having a small bet size minimizes the risk of losing big amounts of money in case your speculation of the price movements goes wrong.
Avoid large leverage
Taking large leverage from your forex broker can significantly magnify your profits, but it comes with a high risk of losing a lot of money, and you should avoid that risk. Even if there is a slight price movement in the opposite direction of the bet you have placed, you can incur significant losses.
Do not choose a highly volatile asset
Volatile assets have a lot of unpredictable price fluctuations, which makes it more difficult to make a correct prediction for either the rise or fall of the price of the asset. So, you should choose a less volatile asset because the price fluctuations are more predictable for these assets.
Final thoughts
Spread betting has become increasingly popular with a huge population of traders, especially in the UK. Most spread betting sites offer a wide range of assets to speculate on and are commission free. They also give you the freedom to trade with your preferred bet size in contrast to traditional trading. Moreover, your taxes with spread betting will be smaller than with Forex trading.
If you are thinking about the best spread betting forex broker, then according to our guide at Forex Broker Reviews are IG and Interactive brokers spread betting features.
