Currencies Spread Betting: What do you Need to Know?

LONDON, January 11, 2011 /PRNewswire-FirstCall/ -- Currencies are undoubtedly one of the most popular markets in both spread betting and the world. The foreign exchange - also known as FX or forex - trades in excess of a trillion pounds in currencies every single day and spread betting providers such as City Index (http://www.cityindex.co.uk/) allow traders to take a position on more than 50 currency pairs. With this in mind, here are four things you need to know about currencies spread betting.

1) Multiple influences

In currencies spread betting, trades are based on the exchange rate between two currencies, such as GBP/USD. The price movements of these currency pairs can be influenced by a huge variety of factors, including the relative strength and weakness of a currency, economic data, political decisions, social unrest and more. This is why many FX traders tend to base their currencies spread bets on the news developments that they believe will have a pronounced impact on the market.

2) Never bear or bull

One advantage of currencies spread betting is that the market as a whole can never be "bear" or "bull". This is simply a matter of balance. If one currency is on the rise (bull), then at least one other must be going down (bear) for it to be doing so.

3) Wide variety

City Index cites GBP/USD, EUR/USD and USD/JPY as the FX pairs most popular with its spread bettors, although this may be at least partly due to the company's competitive daily rolling spreads for EUR/USD at 2 points and GBP/USD at 3 points. In reality there are dozens of major, minor and exotic currency pairs on which you can spread bet, including sterling, US dollar, yen, euro, Swiss franc, Australian dollars and many more.

4) Discipline required

As with any form of spread betting (http://www.cityindex.co.uk/spread-betting/), FX trading requires you to manage your risk carefully and spread bet using a considered strategy. The currency markets can be volatile, so always use a stop loss, outline a profit target and know exactly how much you are prepared to lose before you place the spread bet. This way, you can make all the key decisions before you start currency spread betting - leaving you free to keep up with any market-moving developments as and when they happen.

    For more on currencies spread betting, visit
http://www.cityindex.co.uk/range-of-markets/Currencies-Spread-Betting.aspx.

Alternatively, practice FX trading with a virtual cash balance right now, by signing up for a free spread betting demo account at http://www.cityindex.co.uk/learn-to-trade/demo-account.aspx.

Spread betting and CFD trading are leveraged products which can result in losses greater than your initial deposit. Ensure you fully understand the risks.

SOURCE City Index

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