A: There are two forms of currency spread betting: The first is the value of a currency on a future date, and the second is a daily rate spread also known as a 'on the spot' rate which is intended for very short-term trading. The spread price for a daily rate currency is much lower that a future date price. At the time of writing, the financial bookmaker will quote a 24 point spread as opposed to a 40 point spread for future rates.
If you imminently expect a big move in the markets, then a daily rate is best. But I must stress that it has to be a big move. Even a move of 24 points in a day is fairly uncommon but a 40 points plus movement over say a couple of months is much more likely.
More information on using spread betting to trade currencies is available spread betting currencies article
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A: This can partly be attributed to broker leverage (although it is less of an issue these days). For many new traders, who are starting with a small pot, there isn't the flexibility you can get with the normal forex market makers. For example, if your method calls for a 100-pip stop and the smallest position size available to you is .50p (standard with most spread betting firms) then you need a fund of at least £5000 to arrive at a 1% risk profile. Thus, the main reason is probably the minimum bet value.
Another problem is that some spread betting firms have a system whereby each trade is actually closed overnight and re-opened at a new price. The spread is applied with each new trade, so, on trades that need be to held for days through any sort of drawdown, it's theoretically possible to find your account's real balance being eroded by a series of daily losses. Having said that most UK forex traders stick to spread betting due to the tax free medium aspect.
A: More important to have a look at the information sheet or similar for each product. On Finspreads as an example, it states 'Bet per': for the Dow, 'Bet per' is 1, so a long of £1 per pt at 11,000 is equivalent to a position of £11,000: for GBP/USD Rolling, their 'Bet per' is per 0.0001, so going long at current price of 1.4933 at £1 per 0.0001 equates to a position of £14,933.
Of course, we've all got these things wrong at some time and ended up with a position ten times too large (or small).
Hope that answers some of your questions but feel free to send me queries, comments or concerns at traderATfinancial-spread-betting.com or by filling in the form below :-)
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