With so many different ways to trade the Forex
markets it can be a difficult decision as to which product to use,
standard margin Forex, CFD's or a spread betting company? It's not
a straightforward answer and to be honest, the way the market has
developed in recent years there is really only very small
differences between the product types which means the decision is
very much a personal one.
Pounds per point, physical amounts or lots?
Much will depend on how you wish to express your trading stake;
margin Forex is expressed as the physical amount i.e. you choose to
buy £100,000 of GBP versus the USD, CFD's are traded in lots with
each lot representing the physical amount i.e buy 10 lots of GBP
versus USD where 1 lot is equivalent to £10,000 and spread bets
where you express your trade in £'s per point i.e you buy £5 per
tick of GBP versus USD where a tick means a 0.0001 move in the
underlying price, so a move from 1.6500 to 1.6501 will result in
you winning £5.
All of the Forex Brokers, CFD and spread betting brokers or
providers offer tight spreads and low commissions on the most
popular major currency pairs together with aggressive and
attractive leverage or margin rates. Trading platforms are also
incredibly advanced and provide retail investors with access to
streamed live prices, advanced charting and research that only a
few years ago was only available to traders at the major banks in
the City.
MT4
If you are a technical trader and are looking to use the popular
Metatrader platform or another system that allows you to plug in
technical trading alerting or auto trading systems you are probably
more likely to find solutions for your requirements with a margin
Forex provider (although recently a few of the spread betting
companies have started to offer an MT4 solution). If you don't
require this type of trading solution a CFD provider or spread
betting company is more likely to be the right choice, remembering
that when spread betting you aren't liable for capital gains tax on
any profits you make from your trading activity.
Guaranteed Stop Losses
Most Forex trading companies will offer a 24 hour trading
service and for those wishing to guarantee their downside for every
trade, the spread betting community offers an excellent risk
management tool called 'guaranteed stop losses'. Extra spread is
charged at the opening of the trade but no matter what happens to
the underlying market you are guaranteed to exit the market at your
chosen level with zero slippage. There are experienced traders in
the market that believe a guaranteed stop loss is unnecessary and
simply adds to the overall cost of trading but for those new to the
world of forex trading and who feel a little unsure about the
potential volatility of the markets they can prove to be very
useful and deliver complete piece of mind.
Slippage- what is it?
Slippage is a common word used in the market and refers to a
situation when the market does not move in a regular way and
creates gaps between prices resulting in orders being filled at
prices that are worse for the trader. Those traders who had normal
stop losses in place when the Swiss National Bank recently devalued
the Franc would have suffered horrendous price differences between
their selected stop losses and where their broker would have
actually stopped their position whereas those with a guaranteed
stop in place would have received their exact exit price.
Regulation across all types of trading
All Forex providers, whether they are Margin, CFD or Spread
Betting companies have to be regulated by the FSA which affords
high levels of protection for the retail trader and requires all
companies to segregate your monies from their working capital. The
increased regulation of this area of the industry has improved the
confidence levels of new traders and has ensured that best practice
is maintained by the market. Technology continues to be a major
influence on the choice of provider with some of the spread bettors
and CFD providers leading the way in mobile trading apps; worth
bearing in mind if you anticipate trading or being able to monitor
your prices when you are away from your PC.
Trading.co.uk can help you make the right decision
Finding the right company for your style of trading is very
important and with over a dozen providers regularly advertising
their products there is plenty of choice for new and existing
clients. Much of the decision making process will be around the
trading technology on offer, the product range, charting package
and ease of account opening. Our unique comparison table gives
insight into the services on offer and provides an easy reference
guide when deciding who best to trade with.
Further resources on Forex trading
Comparing Forex brokers
Below is a table of Forex brokers with a few key account-opening
criteria that we believe should be considered when you are deciding
which broker to open an account with. It's not always about price;
finding a broker that suits your style of trading and your
technical requirements is as, if not more, important than shaving a
few pence off of your dealing costs.
Start comparingForex brokers
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