Spread betting on the foreign exchange, or Forex as it is more commonly known, is a brilliant way to combine your knowledge of the markets with your nous for betting.
It remains the most popular market for betting in the global financial marketplace, and as such offers the potential to be a lucrative past time; with many notable opportunities available even in the most volatile of market conditions.
What is Forex Spread Betting?
A spread bet on a Forex market is essentially punting on the fluctuations in value of two currencies. These changes in value can occur due to a number of factors, most notably economic or political reasons. This volatility results in a dynamic marketplace in which proactive gamblers can anticipate changes in market conditions and profit accordingly.
Why Is It So Popular?
Unlike many other spread betting markets, the Forex can be traded 24 hours a day and six days per week (Sunday to Friday). Many other financial markets can only be traded at limited times dictated by the Stock Exchange. Punters and traders of all types enjoy market volatility, particularly where fluctuations can be predicted if you keep a close eye on international news and affairs.
Political instability usually leads to economic downturn, which in turn creates opportunities in Forex spread betting. This information is freely available of course; you simply need to do your homework. Forex spread betting is relatively simple to understand, you are betting on a currency’s strength compared to another, so even beginners can enjoy success once they have gotten to grips with the market conditions.
How to Spread Bet On Forex
The process is fairly straightforward. In our example we will use a GBP and Euro currency pair, but the same idea applies across all currencies. The movement in currencies is measured using a ‘pip’; this is simply the changes in each currency pair’s fourth decimal point. So, for example, the current GBP-Euro price is 0.75220. If this was to rise to 0.75240 then our pip would be 2.0. For spread betting purposes, your stake will be multiplied by these pip movements.
Imagine a scenario where you expect this price to fall further. You would enter into a ‘sell’ trade, let’s say for a stake of £10, and any subsequent falls in price would turn a profit. So, if the price downturn of the pip was 20.0, you would return £200 (stake multiplied by pip). However, if the price actually rose instead of fell, then you would lose your bet. It really is that simple.
How To Be Successful in Forex Spread Betting
As with betting on any market, there are no fast and loose techniques for success. A bit of insight is required, as often is a slice of luck. But you can maximise your chances by following these steps:
Do Your Homework
Understanding any potential movements in currency pairs is vital for proactive trading. For example, the recent Greek election saw the Euro’s value dip considerably; a perfect opportunity for Forex spread bettors. So keeping abreast of international news and financial markets is essential for success.
Some of the fluctuations in prices cannot be predicted, however some can. Understanding how the political and financial landscape may change in the coming days and weeks is crucial if you are to leverage profit on a regular basis.
Market volatility brings huge risk for spread bettors, of course. But there are ways in which we can minimise this: tools such as Stop and Limit Orders, which enable you to enter/exit markets at your own specified prices, enable you to stay in control of your bets at all times.