Key differences and similarities between spread betting and Forex trading
In today's interconnected global economy, currencies are an important component. But many investors think that Forex trading and spread betting are very similar. But there are very many differences between spread betting and Forex trading.
Differences
Taxes: The main difference between spread betting and Forex trading is the tax implications. When it comes to Forex trading, you don't make money on the underlying asset, so you don't have to pay taxes. Therefore, your profits are not subject to capital gains tax or stamp duty. However, winnings are taxable. On the other hand, margin betting is different. It is a form of gambling. There is no physical buying and selling here.
Accessibility: Forex trading is available to all traders all over the world. On the other hand, spread betting is only available to the residents of Ireland and UK. Therefore, before opening a trading account, you should check if it is regulated and allowed in your country.
Type of account: In case of spread betting, most companies can offer you a customized account. But in case of foreign exchange trading, you can choose between a personal account and a corporate account.
Fees: In stock trading, the fees are in the form of commissions. But in case of margin trading, the commissions are included in the margin and are not charged.
Execution Date: In case of margin bets, the expiration date is far in the future. But in case of exchange trades, the account does not expire.
Hedging: In margin betting this is possible due to the tax system. But Forex trading is much more suitable and applicable for hedging.
Islamic rule: Margin betting is recognized as a form of gambling and it is not acceptable in Islamic law. But Forex trading is acceptable in terms of Islamic law. Therefore, brokers offer Muslim traders an exceptional opportunity to open an Islamic account.
Similarities
Buying: Both are leveraged instruments. Therefore, you can make profits by investing small amounts of money as well as increasing your position size. Then, with the help of 5 percent margin, you can hold the position. But these two parameters differ from provider to provider. In most platforms, you can use a margin calculator to measure.
Market Access: With both platforms, you can invest in thousands of markets. For example, you can invest in stocks, cryptocurrencies, gold, ETFs and futures.
Access to platforms: You can get various online options for both Forex trading and margin betting. The platforms are available on both mobile apps and desktops. For example, you can use the popular MetaTrader4 platform.
Profit from market declines: Forex trading and spread betting allows traders to profit from market declines.
Forex trading is one of the most serious and frequent operations. On the other hand, spread betting is a kind of gambling. Many traders prefer spread betting to currency trading. There is no tax liability in spread betting. To say which is better is very difficult and wrong. But if you want to make tax-free profits, spread betting is right for you. You need to internalize the differences and move on.
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