What is Spread Betting in FOREX Trading?
Spread betting is an alternative to using a retail spot FOREX broker-dealer. Trades are done off bids and asks, just as with a retail broker. Spread-betting companies have platforms similar to those I discussed in A Guide to FOREX Trading Platforms. Although not available to U.S. traders, it is perfectly legal in many countries. Some traders I have spoken with claim spreads on many currency pairs are as good or better than on FOREX trading platforms.
Spread betting in currencies has increased in popularity since 2010 based on numerous conversations with traders and volumes quoted on some spread betting websites. Although the end result is the same, spread betting works a little differently from standard retail FOREX. There are no lots per se; you bet in pip increments and put up as margin the amount you are willing to risk. One of my students in the United Kingdom said, half in jest, "A spread-betting firm is just a market maker honestly named!" Some spread-betting companies that specialize in FOREX and offer proprietary online trading platforms for both spot and options trading are: