All trading involves risk. Losses can exceed deposits.

How to trade forex

You can trade forex with IG in two different ways: via spread betting or CFD trading. Learn to trade FX with our quick guide – including how both CFDs and spread bets work, and why traders use them.

All trading involves risk. Losses can exceed deposits.

Spread betting

Spread betting is a way to trade forex that involves making a bet on the direction in which a forex pair’s price is headed. The further it moves in that direction, the greater your profit. The further it moves in the opposite direction, the more you lose.

There are several reasons why spread betting is a popular choice for forex trading, including:

  • Tax-free profits1
  • Access to leverage
  • You can open long or short positions
  • Charges are incurred via the spread instead of paying commission

How to spread bet on forex

A long spread bet on USD/JPY, for instance, is a position that will return profit when the US dollar increases in value against Japanese yen. You can choose the size of your bet per pip of movement in USD/JPY, and the size of your bet will determine your total profit or loss.

Before you place your trade, you can choose to add a stop or a limit. Stops and limits automatically close out your account once it hits a certain level of profit or loss. They can be adversely effected by slippage, though, which is why we offer guaranteed stops that put an absolute limit on your risk in exchange for a fee if they are triggered. 

Spread betting on forex example

1. You open a long position on EUR/USD, when the pair is trading at 1.1165. For a spread bet, this is listed in points, or 11165.

2. You choose the size of your position, and currency you’d like to trade in. For this example, you trade ten pounds per point.

3. EUR/USD rises to 11185, and you close your position.

4. The profit on your long trade is £180. If you’d chosen to short instead, you would have lost £220.

CFD trading

A forex CFD is a contract that allows you to exchange the difference in price of a currency pair between the time you open your position and the time you close it. Open a long position, and if the forex position increases in price you’ll make a profit. If it drops in price, you’ll make a loss. Open a short position, and the opposite is true.

Just like spread betting, you can trade using leverage and won’t have to pay commission to open a position. CFDs are liable for capital gains tax, but you can offset your losses against profits for tax purposes, making them a good product for hedging.1

Find out more about CFD trading with IG

Forex Direct

Experienced CFD traders can interact directly with market makers’ order books using Forex Direct, our DMA service. So you can buy and sell forex without the spread – instead trading at the prices offered by currency providers, plus a variable commission.

Forex Direct provides full transparency over the prices available in the market, allowing you to see extensive data on currency pair prices. You can use it to be more flexible about the price you trade at, or to act as market maker.

CFD trade on forex example

1. You open a short position on EUR/CHF, when the pair is trading at 1.0815.

2. You choose the size of your position. Each CFD contract is equal to a single lot in the base currency, so trading a single CFD is equivalent to selling €100,000, or an equivalent of 10 CHF per point of movement.

3. EUR/CHF drops to 1.0790, and you buy a single CFD to close your position.

4. The profit on your short trade is 2300 CHF. If you’d chosen to go long instead, you would have lost 2700 CHF. Profit or loss is realised in the base currency of your account.

Opening a forex CFD

To open a forex CFD with IG, you can first of all choose whether you’d like to trade at our price, or whether you’d like to use Forex Direct. Forex Direct is recommended for advanced traders, with trades charged via commission instead of the spread.

To trade forex at our price, choose which pair you’d like to trade and then open a deal ticket by hitting its name on our platform. You can choose the number of contracts you’d like to trade, which are usually equal to a single lot in the given base currency. 

Take our free, interactive course

Learn about the advantages of spread betting and CFD trading – and see how you can get started – with IG Academy’s online course.

Why do CFD and spread betting forex prices look different?

You trade forex via CFD in contracts or lots. We therefore display CFD forex prices in the same way you would expect to see them on an FX exchange: eg. 1.31425

Because you spread bet on forex in currency per point, we display prices differently eg. 13142.5. This makes it easier to see per point movements.

This makes no difference to the price you deal at or your potential profit or loss: it simply makes it easier to track per point movements.

Open an account now

It's free to open an account, takes less than five minutes, and there's no obligation to fund or trade.

1 Tax laws are subject to change and depend on individual circumstances. Tax law may differ in a jurisdiction other than the UK.

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