Discover an alternative way to CFD trading with spread betting. Check out our all-around guide and become a knowledgeable spread better in no time!
What is spread betting?
Spread betting is an innovative financial strategy that allows you to speculate on the price movements of various financial markets – including forex, indices, and commodities – without owning the underlying assets.
The key principle is simple: you bet a certain amount of money per point of movement in the market. If your prediction is correct, you earn multiples of your stake for every point the market moves in your favour. On the other hand, you lose multiples of your stake for every point the market moves against your prediction.
Spread betting offers a high degree of flexibility, making it a popular choice among traders.
Spread betting vs. CFD trading
Spread betting and CFD trading are two sides of the same coin. While they may share major similarities, they also have distinct characteristics that set them apart.
Similarities
Here are some commonalities between spread betting and CFD trading:
- Both are forms of derivative trading, providing access to global financial markets without ownership of the underlying asset.
- There is an opportunity to profit from both rising and falling prices of instruments.
- Leverage is available, allowing spread betters and traders to open large positions with a relatively small amount of capital.
Differences
Here are the differences between spread betting and CFD trading:
- One key benefit of spread betting is that it is free from Capital Gains Tax*, while profits from CFD trading are subject to tax.
- In spread betting, all of the costs are included in the spread. Meanwhile, CFD trading may involve commissions, depending on the trading conditions set by your broker.
- Spread betting is often limited to forex, indices, and commodities, while CFDs typically offer broader market access, including individual stocks, ETFs, and futures contracts.
- In spread betting, profits and losses are calculated in the currency of the bet per point movement, while in CFD trading, they are based on the total number of contract units multiplied by the value of each contract.
* - Tax laws are subject to change and depend on the jurisdiction in your country of residence.
Here’s a table to help you visualise it easier.
Spread betting vs CFD trading
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|
Spread betting
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CFD trading
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Non-ownership of assets
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Yes
|
Yes
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Profit from falling and rising prices
|
Yes
|
Yes
|
Leverage
|
Yes
|
Yes
|
Tax-free
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Yes
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No
|
Costs
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Spreads
|
Spreads and/or commission
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Markets
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Forex, indices, commodities
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Forex, stocks, indices, commodities, cryptocurrencies, ETFs, futures
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Spread betting scenario with EUR/USD
Let’s go through a spread betting winning and losing scenario to understand it further.
You spread bet a long position of EUR/USD at £10 per point, predicting that Fibre will rise in price.
Winning case
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Losing case
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If the price of EUR/USD moves from 1.15 to 1.1550,
you gain 50 points.
The calculation would be:
£10 x 50 points = £500 profit
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If the price of EUR/USD moves from 1.15 to 1.1450,
you lose 50 points.
The calculation would be
-£10 x 50 points = £500 loss
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Risk management, such as take-profit and stop-loss orders, is essential to avoid bigger than expected losses.
Why spread bet with ThinkMarkets?
As a leading broker in the spread betting and CFD trading industry, here are the advantages that ThinkMarkets offers:
- Access to financial markets
Spread bet on a diverse range of markets, including major forex pairs, global indices, and precious metals.
- Advanced and powerful platforms
Spread betting recently launched on ThinkTrader, our proprietary, award-winning web and mobile trading platform. Equipped with state-of-the-art technology, ThinkTrader is designed to take your spread betting experience to the next level. Spread betting is also available on both MetaTrader 4 and 5.
As a regulated entity of the Financial Conduct Authority (FCA), ThinkMarkets clients receive automatic FSCS coverage of up to £85,000.
- World-class client support
Our dedicated client support team is ready to assist you in over 20 languages, 24/7.
Account management and funding is easy with ThinkPortal, available on both web and mobile, and enabled with convenient payment solutions.
How to start with spread betting
Keep up with market trends and news. Our clients get access to a global economic calendar and a vast library of educational resources, all designed to help traders like you make informed decisions.
As spread betting involves leverage, it carries a high amount of risk. Always place take-profit and stop-loss orders to secure your winnings or manage your potential losses.
If you’re new to spread betting, begin with smaller stakes to understand how the market works.
Are you ready to spread bet? Log in to ThinkPortal to create your spread betting account today!
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.