Nowadays, in the interconnected global economy, foreign exchange is an important part. But many investors think that Forex trading and spread betting are similar and much alike. But there are so many DIFFERENCES BETWEEN SPREAD BETTING AND FOREX TRADING. You should know the difference between them. The important and vital difference is the mode of transaction. You should know that spread betting is very much popular and considered as the type of gambling according to the rules and regulations of the United Kingdom. But on the other hand, Forex trading is considered as the mode of hypothetical investment. This guide helps the novice and experienced investors to understand the basic difference between Forex trading and spread betting.
The main difference between spread betting and forex trading is that in spread betting there are no physical selling and purchasing of the asset, buying and selling fees are included in spreads.
1. TAX: The implication of tax in spread betting and Forex trading is the main difference. At the time of dealing with Forex trading, you do not win any type of underlying asset, so you do not need to stamp duty charge. So, your profits are exempt both from capital gain and stamp duty. The profits are subject to a capital tax gain. On the other hand, spread betting is different. It is one kind of gambling. There are no physical selling and purchasing.
2. WHO CAN TRADE: Forex trading is available for all traders from all over the world. But on the other hand, spread betting is restricted to the people of Ireland and the UK. So, before opening your trading account, you need to check whether it is regulated and permitted in your country or not.
3. TYPE OF ACCOUNT: In the case of spread betting, most of the companies may offer you an individual account. But in the case of Forex trading, you can get the option between individual and corporate accounts.
4. FEES: In the Forex trading, the fees come in the form of commission charges. But in the case of spread betting, the fees are included in spreads and there are no extra commission charges.
5. EXPIRY DATE: In the case of spread betting, the expiry date is far in the future. But in the case of the Forex trading, the account will not expire.
6. HEDGING: In spread betting, it is possible due to their tax system. But Forex trading is far more suitable and applicable for hedging.
7. ISLAMIC RULE: Spread betting is recognized as the form of gambling and in Islamic law, it is not at all acceptable. But Forex trading is acceptable in Islamic law. So, brokers offer a special opportunity to the Muslim traders and help them to open an Islamic account.
8. LEGAL ISSUE: As you can see that spread betting is limited in small geographical coverage. It is solely legal in Ireland and the UK. But from Canada, it also receives some transactions. In the United States, it is banned and prohibited. So the biggest benefit is the tax-free profit. But in the case of Forex trading, there are no issues related to legalities and acceptance. Forex trading is acceptable all over the world and opens for all customers.
1. PURCHASE: These both are leveraged items. So, you can make your profit by investing small and also increase your position size. With the help of the 5% margin, you can hold the position. But these two are varied between providers. You can get the facility of a margin calculator on most of the platforms to measure.
2. ACCESSING THE MARKET: With both, you can invest in the thousands of markets. You can invest in stock, shares. Cryptocurrencies, gold, ETFs and futures.
3. ACCESSING PLATFORMS: You can get a variety of online options for both Forex trading and spread betting. Platforms are available in mobile application and desktop. You can use the popular platform named MetaTrader4.
4. PROFIT THROUGH THE FALL OF THE MARKET: Both Forex trading and spread betting offers profit to the traders from the falling market.
Forex trading is one of the most serious and popular transactions. On the other hand, spread betting is a type of gambling. Many traders prefer the spread betting over Forex trading. There are no tax obligations in the spread betting. It is very much difficult and tricky to say which is better. But if you want to get the tax-free profit then spread betting is suitable for you. You need to learn the differences and go ahead.