77% of retail accounts lose money when trading CFDs with this provider. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 77% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

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Spread Betting vs CFDs

Reading time: 9 minutes

In this article, we explain the difference between spread betting and CFD ( Contracts for Difference) trading, as well as some of the major factors you need to know about when choosing CFD or spread betting products. Whether you are trading Forex, Stocks or Indices, understanding the vehicles available to you to speculate on such markets is a critical step towards successful trading.

We will also discuss some of the pros and cons of spread betting vs CFDs and show you how to get started the right way!

Spread Betting vs CFDs

Before we look at the similarities and differences of spread betting vs CFDs, it's important to first understand what spread betting is and what CFDs are. Let's take a look.

What is Spread Betting?

When spread betting, the trader is not actually buying or selling an asset. Instead, the trader is betting on where they think the price of a particular market will move to. The trader is given an option to place a bet size per point the market moves.

For example, if a spread better believes the currency pair GBP.USD would rise they would enter a buy or long position. If the trader used a bet size of 10 GBP per point, then every one point move higher in the price of the GBP.USD would result in a 10 GBP profit. The trader would lose 10 GBP for every point the market moved in the opposite direction of their trade.

What is CFD trading?

When trading with CFDs, the trader is trading a contract based on the price of the underlying market. Instead of a trader buying physical assets from their broker (such as currency or company shares), or betting on the market, they can simply enter a contract with their broker instead. The contract is to exchange the difference in the value of an asset from the price of the contract when it is first opened, to the price when the contract is closed.

The value of a contract differs depending on the market you are trading. For example, using the same example in the spread betting example, if a CFD trader bought 10 contracts, or 10 CFDs of GBP.USD, then every one point move higher in the price of GBP.USD would result in a 100 USD profit and every one point move lower would result in a 100 USD loss. This is because when trading currencies one CFD is equivalent to 100,000 units of currency.

You can learn more about the mechanics of CFD trading in our ' What is CFD Trading?' guide.

Both spread betting and CFD trading allow traders to speculate on the price direction of a particular market using leverage, thereby enabling traders to open positions with only a small deposit of the full trade size. Of course, the same also applies to losses. Traders risk losing their deposit faster when using leverage – so use it cautiously!

While there are many similarities there are also some core differences between spread betting and CFD trading as the spread betting vs CFD trading table below shows:


Spread Betting

CFD Trading

Which markets can you trade on?

Forex, Stocks, Indices, Commodities, Cryptocurrencies and more.

Forex, Stocks, Indices, Commodities, Cryptocurrencies and more.

Do you own the asset you are trading?

No.

No.

Can you go long and short?

Yes. You could potentially profit from rising and falling markets.

Yes. You could potentially profit from rising and falling markets.

Can anyone open an account?

Only available to residents of the UK or Ireland.

Available to customers globally.

Are there trading commissions?

No commission but typically higher spreads than CFDs.

Zero, or low commission, with lower spreads depending on account type.

Are there any tax benefits?

Profits are exempt from stamp duty and capital gains tax (CGT)*.

No stamp duty is payable but you do pay capital gains tax (CGT)*

Can losses be offset as a tax deduction?

No.

Yes.

What type of accounts are available?

Individual.

Individual and Corporate.

* Tax laws depend on individual circumstances and are subject to change. Tax law may differ in jurisdictions outside of the UK.


The Difference Between Spread Betting and CFD Trading

The spread betting vs CFD table covered in the last section shows the main similarities and differences between the two trading vehicles. However, there are two big differences between spread betting and CFDs that traders need to be aware of.

Spread Betting vs CFD Tax Treatment

For UK residents, spread betting is free from stamp duty and capital gains tax. For CFD trading no stamp duty is payable but you do have to pay capital gains tax. While some traders may be enticed by the lower levels of tax associated with spread betting there are some disadvantages when compared with CFD trading.

Spread bettors cannot offset any losses for tax purposes. CFD traders have the ability to offset any losses against future profits. For example, if you acquired a property and made a capital gain of £30,000 but then lost £10,000 on your CFD trading, it would result in a lower net capital gain of £20,000 which means you may end up paying less capital gains tax overall. This is a general example and does not take individual circumstances into account. You should consult a professional accountant regarding your tax situation.

Spread Betting vs CFD Trading Platforms

Most spread betting providers have their own unique trading platforms whereas there are many more CFD brokers who use the world's most popular trading platform, MetaTrader.

A screenshot showing the Admiral Markets MetaTrader 5 platform with an open FTSE 100 trading ticket and Symbols window.


This is important as CFD trading via MetaTrader allows users to access advanced features such as:

  • Custom-built indicators allowing you to experiment with your own trading ideas.
  • Trading strategies for purchase from the MetaTrader community for those interested in automated trading.
  • Social trading signals so you can copy other traders if you like their historical results.
  • The ability to trade on a platform with a worldwide interactive community where you can share trading ideas and grow as a trader.

In fact, you can see some of these features for yourself by downloading the Admiral Markets MetaTrader multi-asset class CFD trading platform completely FREE! Simply click on the banner below:

Trade With MetaTrader 5

Choosing between CFD or Spread Betting

When choosing between CFD or spread betting there are many things to take into consideration. While the tax situation may be the most obvious difference to choose between, there are other considerations that could have a bigger impact on your overall profitability.

For example, spread betting and CFD trading allows for trading on the same markets, including Forex, Stocks, Indices, Commodities and Cryptocurrencies. However, CFD traders may have the option to trade directly with the broker's liquidity providers (typically tier-one banks and hedge funds) via ECN (Electronic Communication Network) or STP (Straight Through Processing) technology. This enables traders to receive institutional-grade spreads and lower spreads mean lower costs, which could result in higher profits.

As spread betting involves betting on the view of prices either going up or down, it cannot offer the ability to trade with banks or hedge funds and receive institutional-grade spreads. As CFDs involve trading the underlying market price via contracts, traders can access the ability to trade directly with banks and hedge funds to receive lower spreads and lightning fast execution.

For example, with the Admiral Markets Admiral.Prime account, traders can trade currencies via STP technology and receive spreads from 0 pips plus commission, as well as trade on Spot Metal CFDs across the Admiral Markets MetaTrader platform for PC, Mac, Web, Android and iOS - meaning you could be trading directly with tier-one banks while on the move! To open an account, visit Account Types.

Why trade CFDs with Admiral Markets?

  • Trade with a well-established, highly regulated company including regulation from the UK's Financial Conduct Authority, the Australian Securities and Investments Commission, the Cyprus Securities and Exchange Commission and the Estonian Financial Supervision Authority.
  • Trade with a broker offering some of the lowest and transparent trading fees in the marketplace.
  • Access the fastest and most secure trading platforms from MetaTrader for PC, Mac, Android and iOS.
  • Access a wide range of CFD instruments across Forex, Stocks, Indices, Commodities, Cryptocurrencies and Bonds.
  • Trade with institutional grade spreads as low as 0 pips with Admiral.Prime and connect directly with tier one liquidity providers.
  • Enjoy commission-free trading on some trading accounts, or lower spreads plus commission on other trading accounts.
  • Benefit from a negative balance protection policy for peace of mind.

Did you know that you have the ability to trade CFDs with Admiral Markets risk-free by using a FREE demo trading account? This means you can gain access to the latest real-time market data, access the latest trading insights from expert traders and try out CFD trading for yourself in a completely risk-free environment!

To open your FREE demo trading account, click the banner below!

Trade With A FREE Demo Trading Account

About Admiral Markets

Admiral Markets is a multi-award winning, globally regulated Forex and CFD broker, offering trading on over 8,000 financial instruments via the world's most popular trading platforms: MetaTrader 4 and MetaTrader 5. Start trading today!

This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or recommendation for any transactions in financial instruments. Charts for financial instruments in this article are for illustrative purposes. Past performance is not necessarily an indication of future performance.

Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.