Comparing Spread Betting to Forex Trading

Both Forex and spread betting are very similar and they will both allow you to gain exposure to the Forex market. When you trade with a Forex broker, you are trading one currency for another. With spread betting, you are essentially gambling on the market so it does not actually count as trading currencies. Here are a few things to consider about spread betting and Forex trading.

Spread Betting vs. Forex Trading

Both of these strategies will allow you to watch the Forex market and place trades. If you want to trade Forex, you will have to open an account with a legitimate Forex broker. If you want to get involved with spread betting, you can work with many other firms that specialize in this area. Both trading styles have a trading platform that you can use on your computer, you simply place it for your platform and it is processed almost immediately.

Tax Advantages

The major reason that many people use spread betting, instead of Forex trading, is that it provides them with a tax advantage. If you live in the United Kingdom, you can take advantage of spread betting to avoid any taxes on Forex trades. In the United Kingdom, gambling winnings are tax-free. Since spread betting is considered to be gambling instead of a financial transaction, the money that you earn from spread betting is also tax-free. On the other hand, if you trade the Forex market, you will have to pay regular taxes on the money that you earn. You are still essentially doing the same activity, but with this way, you avoid any taxes.

Multiple Markets

Another difference between spread betting and Forex trading is that spread betting gives you the ability to branch out into other markets. If you are trading with a Forex broker, you will most likely only have the option to trade currencies. If you trade with a spread betting firm, you can generally trade Forex, commodities or even stocks. This gives you greater flexibility and provides you with more opportunities to earn tax-free money.

Interest Charges

Another way that spread betting is different from Forex trading is due to the interest, or swap charges. If you trade Forex and you hold a position for longer than a day, you will either earn interest or pay interest. Either way, you know which way your trade is going. Every day that you will trade, more interest will apply. When you use spread betting, this is not an issue. Spread betting does not utilize any swap charges or interest fees when you hold a position for longer than a single day. Some people prefer the simplicity that this provides.

All in all, both betting and trading are popular strategies. It is important to weigh both strategies before you invest. Consider taxes, your trading style and your long term goals when making your choices.

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