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Know the Difference between Spread Betting and Forex Trading

Many people believe that Spread Betting and Forex Trading are similar, but the fact is that they are different and there are numerous important variations between both that ought to be understood.

betting24.fi urges that people must understand the crucial differences between both before jumping into foreign exchange. Today, companies are in dire need of foreign exchange when it comes to paying for the goods purchased or dealing with any international client. Without discriminating between both, companies can get in the severe loss.

Understanding Difference betweenForex Trading & Spread Betting

Forex trading is a simple traditional phenomenon, where the trader sells a particular currency and gets another currency in exchange for the existing rate of both the currencies.

Spread betting is entirely different science, in this, there is no actual exchange of currency neither there is the purchase of any sort of financial instrument. It involves on anticipating model where the trader predicts whether the price of the financial instrument will increase or decrease.

Tax on the Profits

In Forex trading, the trader is expected to pay tax on their profits through stamp duty and capital gain taxes. Though these taxes may feel small initially but at the end of the year if you are a serious trader you will feel a large sum of amount has gone out of your bank account in terms of taxes.

In Spread betting, the trader has no actual currency and since there is no physical sale or purchase therefore there are no taxes. Moreover, Spread betting is officially gambling as per UK law therefore there is no stamp duty and no capital gain taxes.

Commission

Forex trading is a traditional concept and hence there is a commission model associated with it. On the purchase or sale of the currencies, the trader has to give commission to the broker associated with it.

When it comes to spread betting, there lies no commission policy on the transactions. The traders in Spread betting simply make their profits from the difference between the actual bid and the asked prices.

Trading and Islamic Law

As per Islamic laws, Forex trading is acceptable and hence the Muslim traders always prefer it.

Spread betting is a form of gambling and hence as per Islamic laws it is forbidden, therefore the Muslim traders avoid it.

Legality

Forex trading is legal and allowed throughout the world. Every country across the globe allows it and the government earns from taxes implied on the profits earned by the traders.

Spread betting is illegal and mostly banned in many countries, it is even banned in the country it was invented – the United States. This is mainly because of its tax-free structure.

Conclusive Statement

These are the core difference between both the famous form of trading, the traditional Forex trading and the Spread betting. Forex trading will always be considered legal, whereas, Spread betting will always be in the line of illegality due to its nature of gambling and betting.

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