LONDON–(Marketwire – February 19, 2013) – Currency trading seems to be on the top of traders’ minds and portfolios, with the British pound experiencing volatile swings just days after world leaders resolved to stand firm against currency wars in the G20 Summit held in Russia over the weekend.
The week opened with the Queen’s currency sliding to a seven-month low against the US dollar and also traded at a 15-month low against the euro on Monday, February 18, over renewed fears about the health of the UK economy and concerns that the UK may lose its AAA rating this year.
Spread betting could be a way of taking a position on the future direction of a country’s currency, with investors able to profit irrespective of whether a currency (for example the British pound) rises or falls against a basket of currencies, such as the euro or US dollar.
Where next for the Queen’s currency?
Sterling’s tumble follows comments from BoE policymaker Martin Weale over the weekend that the currency may need to weaken further to make the UK more attractive for exports.
Spread betting can be a great alternative to conventional forex trading, enabling investors to profit from any movement in currency prices, with all gains being free from UK Capital Gains tax*. With spread betting, you can profit irrespective of whether a currency, such as the British pound or US dollar, rises or falls in value against another currency. If you expect a currency to rise in value against, say the US dollar, you simply go long or buy GBP/USD. Alternatively, if you expect the pound to fall in value, you go short or sell GBP/USD.
You will make a profit so long as prices move in the direction you had anticipated. However, if prices move against you, you would net a loss that could exceed your initial deposit if you do not manage your risk with tools such as guaranteed stop losses.
Find out more about spread betting with financial spread betting provider Finspreads.
With spread betting your losses are magnified in the same way as your gains if the market moves against you and can result in losses exceeding your initial outlay. Please ensure you fully understand the risks involved.
*Spread betting is exempt from UK Stamp Duty. All profits are also currently free from UK Capital Gains tax. However, tax laws are subject to change.