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Difference between Spreadbetting and Forex

  • #1
  • First Post: Mar 29, 2010 11:14am Mar 29, 2010 11:14am
Hello,

1) Can someone tell me what is the difference between spreadbetting (on forex) and trading on forex apart from interest rates you get and taxes ?

2) I want to trade on forex, however should I start trading on forex or spreadbetting as I am not going to leave overnight for now ?

3) My choices of Brokers are: Spreadbetting: IGindex, GFT
Forex: FXCM/DBFX (I like the platform).

Could you recommend something else (please only recommend if you're using them at least for 1 year.

4) What is the advantages and disadvantages of spreadbetting (forex) and forex ?

Thank you
  • #2
  • Mar 29, 2010 12:32pm Mar 29, 2010 12:32pm
Quoting Miriad
Hello,

1) Can someone tell me what is the difference between spreadbetting (on forex) and trading on forex apart from interest rates you get and taxes ?

2) I want to trade on forex, however should I start trading on forex or spreadbetting as I am not going to leave overnight for now ?

3) My choices of Brokers are: Spreadbetting: IGindex, GFT
Forex: FXCM/DBFX (I like the platform).

Could you recommend something else (please only recommend if you're using them at least for 1 year....
I guess it depends to a certain extent on your level of investment.

I think the minimum spreadbet is 50p per pip, some companies I think it's even £1. The advantages are obviously tax exemption on you winnings (unless it's your sole source of income - very 'grey' area), and the range of instruments available to trade. The disadvantages are the minimum bet size, and you can't claim tax relief on your losses. There may be maximum bet limits as well.

There may also be other (dis)advantages, ask the respective brokers why you should trade their product over the other.

If you opt for spreadbet then do your research, companies are fighting over business right now and it's a good time to get some free money or risk free trading!
  • #3
  • Mar 30, 2010 3:24am Mar 30, 2010 3:24am
Quoting pipmutt
I guess it depends to a certain extent on your level of investment.

I think the minimum spreadbet is 50p per pip, some companies I think it's even £1. The advantages are obviously tax exemption on you winnings (unless it's your sole source of income - very 'grey' area), and the range of instruments available to trade. The disadvantages are the minimum bet size, and you can't claim tax relief on your losses. There may be maximum bet limits as well.

There may also be other (dis)advantages, ask the respective brokers why you should trade their...
Thanks,

Is it the interest rate which grabs attention of traders over spreadbetting ?
  • #4
  • Mar 31, 2010 2:25am Mar 31, 2010 2:25am
Quoting Miriad
Thanks,

Is it the interest rate which grabs attention of traders over spreadbetting ?
I wouldn't think so, I think it's more likely to be something to do with the word 'bet' as opposed to 'trade', same difference but maybe not psychologically. Don't forget spreadbetting isn't available to US residents as far as I know, and they probably account for a high percentage of people in this business.

Spread betting is still popular though, especially for sports.
  • #5
  • Mar 31, 2010 3:17am Mar 31, 2010 3:17am
The main advantage of spreadbetting in the UK is it's tax free status. However you do need to be careful with this tax free status. If your spreadbetting is deemed to be part of or connected to a business then your winnings are taxable and I would think any loss could be offset against any tax liability. Check the revenues website on the tax issue, there is some info but its not comprehensive. Another advantage is the ability to set your own bet size though most companies do have a miinimum bet. Usually £1.
Things to watch out for are the size of spreads and most importantly if the company rolls your position every day do they charge a new spread every time they roll ie daily. If they do then do not use that company. I have used GFT for some years without issue.

Hopes this helps.
  • #6
  • Mar 31, 2010 3:57am Mar 31, 2010 3:57am
Quoting Nut
The main advantage of spreadbetting in the UK is it's tax free status. However you do need to be careful with this tax free status. If your spreadbetting is deemed to be part of or connected to a business then your winnings are taxable and I would think any loss could be offset against any tax liability. Check the revenues website on the tax issue, there is some info but its not comprehensive. Another advantage is the ability to set your own bet size though most companies do have a miinimum bet. Usually £1.
Things to watch out for are the size...
Thanks a lot for clearing this for me.
  • #7
  • Mar 31, 2010 9:24am Mar 31, 2010 9:24am
It's hard enough to trade profitably with a real ECN broker who at least in theory is indifferent to whether you win or lose, but when you're betting against a bucket-shop, you can 'spreadbet' your bottom dollar that they're going to make it almost impossible for you to make money out of them in the long-run especially if your time horizons are anything below a couple of days. I read an interesting thread at another forum concerning a particularly popular spreadbetting firm (CS), and the rep was quite clear about it; they will not tolerate a winning trader on their books. I've tried a few which I won't specify and have found them all to fall woefully short of the standards that I expect, which is not to say that there aren't outfits out there which are acceptable.

It appears that there are two types of spreadbetting companies - those that are blatant bucket shops, and those who have creatively structured their business so they are identical to a regular forex broker but somehow give it the name 'spreadbetting', which is probably no more than a marketing ploy. Some even claim to be ECN. There was one that caught my eye called Prospreads which did look promising with Direct Market Access functionality and quite competitive spreads but I never followed it up as the minimum bet increments were a bit rigid for my liking.

Always do your due diligence before depositing money with a broker.
  • #8
  • Mar 31, 2010 12:54pm Mar 31, 2010 12:54pm
Quoting birdt
I read an interesting thread at another forum concerning a particularly popular spreadbetting firm (CS), and the rep was quite clear about it; they will not tolerate a winning trader on their books.
That's some admission, I wonder if the rep is still working for them!

I've just opened an account with ETX (actually a mate did as I've already had one promotion), it's a risk free 250 quid promotional deal, it will be interesting to see how it plays out if the above is the norm for these shops.

The plan is to progress from the free £250 to a few thousand, then move on to a regular shop ie Oanda/FXCM/GFT etc, then on to an ECN...the target is 2m in 2 years from starting out with zero. I say it can be done, and along the way lock in some profit, worst way is we lose nothing so it seems like a reasonable risk:reward, lol
  • #9
  • Last Post: Apr 9, 2014 6:48am Apr 9, 2014 6:48am
Quoting Nut
However you do need to be careful with this tax free status. If your spreadbetting is deemed to be part of or connected to a business then your winnings are taxable and I would think any loss could be offset against any tax liability. Check the revenues website on the tax issue, there is some info but its not comprehensive.
I don't know where do you guys keep getting this information?Spread Betting is tax free and it always has been. Full Stop
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