Decide how you’d like to trade forex
A lot of forex trading takes place between major banks and financial institutions, which buy and sell massive amounts of currency every single day. For individual traders who don’t have the means to make billion-dollar forex trades, though, there are three main ways to get involved: forex spread betting, forex CFDs or trading forex via a broker.
What is forex spread betting?
Forex spread betting 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 – and the further it moves in the opposite direction, the more you lose. The amount that you make or lose per point of movement is determined by the size of your bet.
Forex is just one of the markets you can trade using spread betting. Plus, all your profits from spread bets are completely free from tax.*
Find out more about spread betting
What is a forex CFD?
A forex CFD is a contract in which you agree to exchange the difference in price of a currency pair from when you open your position to when 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.
CFDs are liable for capital gains tax, but you can offset your losses against profits for tax purposes.* And like spread betting, you can trade forex as well as thousands of other markets.
Learn more about CFD trading
Forex trading via a broker
Forex trading via a broker – or sometimes via a bank – works in a broadly similar way to CFD trading and spread betting. You’re speculating on the price movements of currency pairs, without actually taking ownership of the currencies themselves. If you think a currency pair’s price is headed down, you can go short instead of long.
When you trade forex via a broker, though, you won’t have access to other markets – and you’ll have to pay tax on any profits you make.*
Discover the benefits of forex trading