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.
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.
Range of Markets
37 FX pairs only
Over 12,000 including shares, indices, FX and commodities
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.
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 stakesLet’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 sizesAlternatively, 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 sizesForex 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).
Your leverage or initial margin calculations also differs across our key three products; spread betting, CFDs and forex.
Spread bettingThe 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 tradesThe 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 tradesThe 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).
Spread betting, CFDs and Forex trading are leveraged products which can result in losses greater than your initial deposit. Ensure you fully understand the risks.
*Spread betting and CFD trading are exempt from UK stamp duty. Spread betting is also exempt from UK Capital Gains Tax. However, tax laws are subject to change and depend on individual circumstances. Please seek independent advice if necessary.
+Margin Factor is shown here as a guide only. For the current margin factor applicable to your position please refer to the Market Information on our Trading Platform.
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