The medium of spread betting provides a very simple way of trading currency currencies and this method of speculation is increasing in popularity as traders switch to trading currencies in the absence of volatility in other markets. In fact, in some brokers, forex trading can account for up to one third of a provider’s total trading volume.
Forex is a very liquid market, which means that traders can easily enter and exit positions, and its volatile nature makes it an ideal market for trading traders with differentials. In addition, the fact that bets are leveraged means that you only need to deposit a small amount to open a position that most bettors find attractive. For example, a relatively quiet day in the FTSE 100 index can see the index traded in a range of only 30 to 40 points, but a slow day in the currency markets may mean that this range is closer to 75pts.
Tips for trading currencies through Spread Betting:
Go long or short: you can go long (buy) or short (sell) a pair of currencies so you can make money either by an increase or fall in the pair.
Leveraged trading: Margin trading means that you only need to deposit a relatively small amount in relation to the exposure taken. While this can result in large profits, it can also lead to substantial losses, so a prudent money management policy should be adopted.
Risk management: never risk more than 5% of your account in a single spread bet. This means taking into account the size of the stake and the level of the stop loss.
Example of Forex Trading: when the distribution bets is the first currency of a pair (what is known as the base currency) what matters. Therefore, if you believed that the pound sterling would be against the dollar, you would be considering buying the GBP / USD (and selling it short if you thought it would weaken).
Example: Let’s say that the EUR / GBP is trading at GBP0.8625 – GBP0.8628. This means that the euro is worth 86p and a minimum bet of 1 GBP, one point would result in an exposure of 8,628 GBP. If I thought that the EUR would win against the pound in the coming days or weeks, I could buy with the offer of GBP0.8628. If the euro recovered in the next two days and the EUR / GBP moves to GBP0.8755 – GBP0.8758, it could close the position at GBP0.8755 to obtain a gain of GBP127.
Use Technical Analysis or Fundamentals to operate: You can use technical or fundamental analysis to trade currencies. For short-term positions, technical analysis is much more important, but you should still be aware of key economic releases, such as unemployment and inflation.