What is the Difference Between Spread Betting and Forex Trading?

This article aims to debunk the misconceptions that some people still hold about Forex trading and spread betting. It is believed that Forex trading involves buying and selling currencies and you can’t make money in this. Wrong, this is not the case. Forex trading is now very popular as it has a wide reach and high liquidity compared to other trading platforms.

This is not all though, and there are some huge differences between the two. Before we start, it is important to understand what spread betting and currency trading are. Here are the five main differences between them:

1.   Direction

Lets’ start with the most obvious difference between Forex trading and Spread betting. Direction is one of the most important aspects of Forex trading. It’s what you do to make money, and the purpose of Forex trading is to predict which way the market will go. Spread betting only has one direction and that’s up. The currency traders, on the other hand, can predict the direction of the market, but this is usually not possible. You have to see how the market is going and how you can profit from that.

2.   Timing

For example, if you were to buy currencies at the right time, you could be successful. In Spread betting, not so much, as they can take too long to develop. Spread betting requires very quick research and trade, especially in Forex trading. Forex brokers with bonus rounds for fast trades are one of the most popular trading platforms.

3.   Gambling

When you think about currency trading and spread betting, what is the image that pops into your head? Someone buying a piece of paper for a dollar, how can that be considered a real risk? Well, it can, as when you have invested money in the currency, it could crash. If you try to time the market, you could lose your money. With currency trading, your money is actually at risk. This is a very big difference as a lot of people invest into spread betting to try to make money from Forex.

4.   Portfolio

Currency trading and spread betting are both conducted with a portfolio. In Forex trading, you have a small amount of money and need to build your portfolio over time, in order to make money. In Spread betting, you can go on an open-ended strategy and buy some currency every time it moves up and it’s relatively easy to lose money in this strategy.

5.   Time limit

In Forex trading, you have to pay for the time you use, but this is never compulsory in Spread betting. This is the big difference between the two, as Forex traders have to close their positions once the market moves. You can have many open positions and still be long of the market, if you close them. This is why Forex trading can be so profitable as the market is open until it settles, and this can take time.

Conclusion

There is a lot to take into account, and this is why the differences between Forex trading and spread betting are big. Forex trading is essentially the same as spread trading, but the currency is different. But do not be deterred from trading, as there is so much to it. Using this article as a guide, you will soon be trading like a pro.

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