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Spread Betting, Futures or ETFs: What Type of Forex Trading is for You?

The largest and most liquid market in the world, featuring hundreds of different currencies available to buy and sell, Forex trading offers plenty of opportunities. From exchanging major to minor currency pairs, trading forex is a popular choice for many who have an interest in the financial markets. What can begin as a hobby or part-time work could develop into a full-time career. In order for that to happen though, you will need to decide on your preferred method of forex trading depending on your character.

Spread Betting

As currency prices are constantly rising and falling, Spread Betting on the forex market can be a good trading option. This works in the same way as spread betting across other assets, so with forex, it involves betting on the price movement of currency pairs.

The bid and the ask price will be quoted for a currency pair, with these representing the spread. Traders then bet on whether the value of the currency pair will be lower than the bid or higher than the ask price. The main benefits are that traders can use leverage, requiring less capital to begin trading, and do not actually own the underlying currency when spread betting.

forex trading online

Futures

All of the major ones, and many other popular currency pairs, have futures contracts and options on those futures contracts available. This allows traders to speculate on the direction of particular currency pairs, with the ability to profit from currency exchange rate fluctuations.

Unlike regular forex trading, where the agreed currencies are exchanged immediately, forex futures are a derivative contract. It means that they will expire on a set date when they are cash settled. They can be used by new investors who only wish to trade small positions at first, as well as for hedging strategies.

ETFs

Exchange-traded funds (ETFs) are commonly associated with stocks and bond indexes, but more recently have been used to track currency movements. Unlike futures and other derivatives, trading forex ETFs can be a lot more straightforward for new and existing traders.

If you think a currency will rise, then you buy the appropriate forex ET, or if you believe it will fall in value then sell. Strict margin requirements mean this method is best for those who are risk-averse too.

These are three common ways to begin or change your forex trading method, with each one suiting different styles and purposes.

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