The spread is the difference between the price at which you can buy a currency (the offer price) and the price at which you can sell it (the bid price). In a very liquid market, where great quantities of currency are being traded, this difference will generally be smaller than in less liquid markets, where smaller quantities are being traded.
In any forex pair, you are trading the strength of the first currency against the second currency. So for EUR/USD you are trading the strength of the euro against the US dollar. If you buy, you want the price of the euro against the dollar to rise. If you sell, you want the price of the euro against the dollar to fall. With spread betting you place a stake (in your account currency) per pip movement in the price of the forex pair. In the above example, you might buy £10 per pip, and so make £10 for every pip the price of the euro against the dollar rises (and lose £10 for every pip the price of the euro falls). With CFD trading you open a contract which represents a trade in the currency. So you might buy 1 CFD of EUR/USD, which (with InterTrader) represents a trade of €10,000 into US dollars. Your profit or loss is calculated in the second currency, in this case US dollars, and is then (if necessary) converted into your account currency. CFD trading more closely reflects physical forex trading in that you trade in the first currency and your profit or loss is realised in the second currency when you close your position.
The foreign exchange market is grouped into pairs of currencies, showing the exchange rate for trading one currency for another. Some popular forex pairs include GBP/USD, EUR/USD and USD/JPY.
Though spread betting can offer investors with diverse trading styles the opportunity to benefit from their market research and chart analysis, you must remember that spread betting also involves risks. When trading on margin, losses can be enhanced just as much as gains. If, however, you implement proper money management techniques and limit margin to reasonable levels, most of these risks can be contained and longer-term gains can be generated using stable and consistent investment strategies.

Margin trading involves the use of leveraged position sizes where relatively small amounts of money can be used to fund much larger positions. For example, a trade using 10:1 leverage would enable a trader with £10 to open a position size valued at £100. In this case, the extra £90 is borrowed from the spread betting provider to enable the trader to maximise potential gains (or losses, if the position does not work as anticipated).

Providers typically make margin requirements forcing traders to have a certain amount of money available in the trading account (generally anywhere from 0.5% to 10% of the total trade size) to keep the margin trade open and active. You should remember that, while margin trading can allow traders to maximise gains through larger position sizes, losses can be equally enhanced and you will be responsible for these losses if the trade moves adversely.

The most obvious difference between a spread bet and a CFD (Contract For Difference) is the way each is viewed in terms of tax liability. When trading CFDs, traders are held accountable for taxes after capital gains are realised. This liability might lead many to believe that spread betting is always the preferable method but this is not always the case. One benefit of CFD trading is that losses can actually be written-off on your tax liabilities. This is not the case for spread bets because these trades have no tax liability. Some traders therefore prefer CFDs because they offer a higher level of liability protection.
UK residents have an added advantage when spread betting, as gains made from these trades are not subject to taxation fees.* Spread betting gains are not considered capital gains, as spread betting is technically considered to be gambling, and taxes are not required for this type of transaction.
Forex prices are sent via data feeds, which show the best available bid (purchase) and offer (sell) prices currently available from a network of large foreign exchange banks. These prices are quoted in each forex pair (the relative value of one currency against another). In some cases, the bid price will be derived from one bank and the offer price from another, it all depends on which bank is offering the best price for each value. The difference between the bid and offer price is referred to as the ‘spread’ and this includes the amount that is charged by your spread betting provider to complete the transaction.

Spread betting and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 78% of retail investor accounts lose money when trading these products with this provider.
You should consider whether you understand how these products work and whether you can afford to take the high risk of losing your money.