The two main ways to make money via the stock exchange are by Forex trading or spread betting. Both platforms increase in popularity year after year, but what are the differences between the two? Which one will suit you best?
They both have similar economic values and benefits, but don’t be fooled; they need to be handled very differently. Read on for more information on the differences between the two, along with what you should watch out for when it comes to both spread betting and Forex trading.
Both Forex trading and spread betting will mean you will need to keep your eye on the Forex market. Those who want to trade Forex will need an account with a broker that can handle such market. Spread betting is a more versatile field in terms of the broker you can choose, because many of them offer it as a supplementary service. Both utilise a platform that can be either software or web based, meaning that getting up and running in either field isn’t too difficult.
Tax makes up a big part of every trader’s expenses, so a big upside to choosing spread betting is the tax advantages involved. Those based in the UK can utilise spread betting to avoid taxes on any Forex trades, this is because gambling winnings are completely tax-free. Spread betting qualifies as gambling, instead of a traditional financial transaction. Standard Forex trading on the other hand can be tax heavy, you are in a sense doing a similar activity on a larger scale, yet paying more for the privilege of doing so.
The degree of market access offered is where spread betting succeeds and trading Forex fails. Spread betting allows you to branch out and invest your money across multiple markets at one time. If you are operating within a specialist Forex broker then odds are you will be strictly limited to just Forex trading. Those who spread bet can utilise not just the Forex market, but also stocks and commodities as well. Out of the two, spread betting will provide you with a greater level of flexibility.
Forex trading often requires you to hold a position for longer than a day, should you do this you will either earn or pay interest. Every day you continue to trade and hold the same position, interest will be applied. Spread betting is different, as swap charges won’t be applied when you hold a position for longer than a day, allowing for a greater sense of simplicity and transparency.
The differences between the two markets generally occur when it comes to costs, but outside of that the differences are negligible at best. Those based in the UK must decide whether they like the traditional and robust nature of Forex trading, or the gambling centric nature of spread betting. Remember, before you commit to either of them do your research, and don’t sign up to any platform that you’re not comfortable with.