We offer forex trading, spread betting and CFD trading across a range of powerful and innovative trading platforms which have been designed to maximise your trading potential.
The fundamentals of forex trading, spread betting and CFD trading are in fact very similar but there are some key differences. For example, to help cater for all of your trading needs, we offer forex trading via separate trading platforms to our spread betting and CFD offering.
This section aims to identify those key differences and help you to decide which trading account to open with us.
Key differences:
- Range of Markets: Spread bets and CFDs offer a broader range of markets to trade including indices, stocks and forex, whilst forex trading offers pure currency trading only on 37 forex pairs.
- Trading Platforms: As a forex client, you can gain access to browser-based, downloadable, mobile (Android and iPhone) and Android tablet trading platforms. For spread betting and CFDs, we offer a browser based trading platform as well as the City Trading™ Application for iPhone, Android and Blackberry mobiles. View our Trading Platforms section.
- Capital Gains Tax: Currently in the UK, all gains made in spread betting is free from UK Capital Gains Tax and this benefit is not applicable to gains made in CFD or Forex trading. UK Tax Laws are subject to change.
- Commission: With CFD equity trades only you are charged a small commission for each trade you place. For all other CFD markets, spread bets and forex trading, trades are free from commission, but you pay a slightly widened spread.
- Guaranteed Stop Losses: This is available via the spread betting and CFD platforms only. For forex trading, standard stop losses are available.
- Trade Sizes: Trade sizes differ across forex, spread bets and CFDs. For more information, please see the table below.
- Greater Leverage: City Index forex traders can trade the forex markets from a leverage ratio scale of 20:1 to 400:1, meaning you can trade our forex pairs up to a margin equivalent of 0.25%, greater than what is currently offered for forex markets via our spread betting and CFD platforms.
- Margin/Leverage calculations: All forex trades are undertaken with a leverage ratio such as 100:1. However, spread bets and CFD markets are margined in a different way, as either fixed percentage such as 5% or margin factor such as 60 x stake.
At City Index, we seek to cater for all client needs and our ability to offer forex trading, spread betting and CFD trading helps us to give you a greater range of markets and better trading flexibility.
| |
Forex
|
Spread Bets
|
CFDs
|
Range of Markets
|
37 FX pairs only
|
Over 12,000 including shares, indices, FX and commodities
|
Over 12,000 including shares, indices, FX and commodities
|
| Commission |
Free |
Free |
Equity markets only |
| Widened Spread |
Yes |
Yes |
Non-equity markets only |
| Trade Size |
Lots |
£ per point |
CFDs |
| Minimum Trade Size |
1 lot of 5,000 |
25p per point |
1 CFD |
| Margin/Leverage |
Leverage ratio i.e. 100:1 |
Margin factor or Percentage i.e. 60 x stake or 1% |
Percentage i.e. 1% |
| Platforms Available |
Download, browser-based, mobile (iPhone and Android) and Android Tablet |
Browser and mobile (iPhone, Android, Blackberry, Windows, Java) |
Browser and mobile (iPhone, Android, Blackberry, Windows, Java) |
| Risk Management Orders |
Standard tools available, including Stops Losses |
Full tools available including Guaranteed Stop Losses |
Full tools available including Guaranteed Stop Losses |
| Demo Account |
Yes |
Yes |
Yes |
Examples of key differences between Spread Bets, CFDs and Forex
The two key differences in the mechanics between spread bets, CFDs and forex trading relate to leverage and trade sizes. Below you can find out more information about both of these two key differences.
Trade sizes and notional value examples
The mechanics behind your trade size, or ‘quantity’, and how this correlates to your trade notional value differs across spread betting, CFDs and spot forex accounts. As the table above denotes, with spread bets your trade size is correlated to a stake size, whilst forex trade quantities are placed by lot sizes and CFD trade sizes by the amount of CFDs.
Spread betting stakes
Let’s say you wanted to go long, or ‘buy’, Company ABC shares, which are currently trading at a price of 550p. You decide to place a buy spread bet of £10 per point. This means that for each penny Company ABC shares rally above 550p, you net a £10 gain.
The notional value of the spread bet is £5,500 (£10 x 550p).
CFD trade sizes
Alternatively, if you wanted to buy Company ABC shares through a CFD trade, which is still trading at 550p, you could go and buy 1000 CFDs. This means that your profits or losses (P&L) will increase for each penny Company ABC shares rally or fall. Your total P&L is calculated as the difference between the opening value of the contract to the closing value of the contract.
The notional value of the CFD trade is £5,500 (1000 CFDs x 550p).
Forex trade sizes
Forex trades operate very differently to your typical spread bet or CFD trade size. However, each forex trade is placed per lot size, I.e.10,000, and this is the amount that you are either buying or selling in a currency trade.
For example, let’s say you want to buy USD/CAD as you believe the US dollar will strengthen or ‘appreciate’ against the Canadian dollar. You choose to buy 1 lot of 10,000 at an indicative price of 0.9900. For each 0.0001 that the USD/CAD rate rallies, you will net 0.0001 x 10,000 gain.
The notional value of the trade is 9,900 Canadian dollars (10,000 x 0.9900).
Leverage examples
Your leverage or initial margin calculations also differs across our key three products; spread betting, CFDs and forex.
Spread betting
The amount of margin you are initially charged to place a spread bet will differ depending on whether you are spread betting on an equity market, or a non-equity market. For equity spread bets, your initial margin is a fixed percentage, i.e. 10% of the notional value of your trade. However, for non-equity spread bets, your initial margin is a margin factor multiplied by your stake size.
For example, if you were to place a buy spread bet of £5 per point on Company ABC's shares, which have an initial margin rate of 10%, and whose price is currently 550p, your initial margin requirement would be £275 (£5 x 550p x 10%). However, if you were to place a buy spread bet of £2 per point on the FTSE 100, with a margin factor of 60 x stake, and the current indicative price is 5900, your initial margin requirement would be £120 (£2 x 60).
CFD trades
The amount of margin charged initially for CFD trades is a fixed percentage of the trades notional value.
For example, if you were to place a sell CFD trade of 1,000 on Company ABC’s shares price, with it currently trading at 549p and has an initial margin rate of 10%, you would be charged an initial margin of £549 (1,000 x 549 x 10%).
Forex trades
The amount of margin charged for forex trades is worked differently to spread bets or CFD trades. Each forex trade is placed at a specific leverage ratio dictated by you, i.e. 100:1.
It is the leverage ratio which plays a key role in how much margin your trade is charged and as such, by being able to dictate your leverage ratio for forex trades, you can gain greater control over your trading. This is one key difference between a forex trading account at City Index, and a spread betting or CFD trading account.
For example, if you wish to buy 10,000 of GBP/USD, which is trading at an indicative price of 1.5850 and decide a leverage ratio of 100:1, you would be charged an initial margin of $158.50 (10,000 x 1.5850 / 100). If however you had decided upon a leverage ratio of 400:1, which is our highest leverage ratio, you would be charged an initial margin of $39.63 (10,000 x 1.5850 / 400).
