Difference between CFD and Spread Betting explained by ForexSQ.com experts for dummies, All you need to know about the Difference between CFD and Spread Betting explained for you to compare and finding out which one works for better to make money online.
Difference between CFD and Spread Betting
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- Trading Platforms: You can have access to downloadable and browser-based platforms as well as ward-winning tablet and mobile trading platforms. View our Platforms section.
- Range of Markets: CFDs and Spread bets provide a broader range of markets to trade comprising stocks, indices and Forex.
- Capital Gains Tax: At present in the UK, all gains made in spread betting is free from UK Capital Gains Tax. This advantage is not applicable to gains prepared in CFD trading. UK Tax Laws are answerable to change.
- Assured Stop Losses: This is accessible to both CFD trading and spread betting products.
- Commission: By means of CFD equity trades only you are charged a little commission for all trade you place. For all other spread bets and CFD markets, trades are free from commission, but you pay a slightly extended spread.
- Trade Sizes: Trade sizes vary across CFD trading or spread betting. For more info, please see the table below.
CFD providers seek to cater for all customer requirements and our ability to provide CFD spread betting comparison helps us to give you a larger range of markets and flexibility of improved trading.
Difference between CFD trading and Spread Betting comparison table
|Range of Markets||Over 12,000 comprising indices, shares, FX and commodities||Over 12,000 including indices, shares, FX and commodities|
|Widened Spread||Yes||Non-equity markets only|
|Commission||Free||Equity markets only|
|Minimum Trade Size||25p per point||1 CFD|
|Trade Size||£ per point||CFDs|
|Risk Managing Orders||Full tools accessible comprising Guaranteed Stop Losses||Full tools accessible comprising Guaranteed Stop Losses|
|Platforms Available||Browser, mobile and tablet||Browser, mobile and tablet|
Examples of spread betting CFD trading difference
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The 2 main differences in the mechanics between CFDs and spread bets relate to trade sizes and leverage. Below you can find out more info about both of these 2 important differences.
Examples of Trade sizes and notional value
The procedure behind your trade size, or ‘quantity’, and how this associates to your trade notional value varies across CFDs and spread betting. As the table above signifies, with spread bets your trade size is connected to a stake size, whereas CFD trade sizes by the amount of CFDs.
CFD trade sizes
Alternatively, if you required to buy Company ABC shares throughout a CFD trade, which is quiet trading at 550p, you could go and purchase 1000 CFDs. This meaning that your profits or losses will rise for each penny Company ABC shares rally or decrease. Your whole P&L is calculated as the difference among the opening values of the contract to the closing value of the contract.
The CFD trades notional value is £5,500 (1000 CFDs x 550p).
Spread betting stakes
Let’s say you required to go long, or ‘buy’, Company ABC shares, which are presently trading at a value of 550p. You select to place a purchase spread bet of £10 per point. This meaning that for every single penny Company ABC shares rally overhead 550p, you net a £10 gain.
The spread bet notional value is £5,500 (£10 x 550p).
Your initial margin or leverage calculations also varies across our main three products; Forex, spread betting and CFDs.
The total of margin you are primarily charged to place a spread bet will vary depending on whether you are spread betting on a non-equity market or an equity market. For equity spread bets, your initial margin is a stable percentage, i.e. 10 percent of the notional value of your trade.
For instance, if you were to place a buy spread bet of £5 for each point on Company ABC’s shares, which have an initial margin level of 10 percent, and whose price is at present 550p, your initial margin necessity would be £275 (£5 x 550p x 10%).
You must note the spreads, leverage and margin trading rules above are different in each broker, So check all of the trading rules once you want to start CFD trading or spread betting with a new company.
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