Spread Betting GBP/USD (Cable)

For anyone who has looked at Forex trading, you will know that the GBP/USD, which is also known as Cable, is one of the major and most volatile currency exchange rates on the Forex market. It has the potential to be very profitable, which may be why it is the most traded pairing. In fact some Forex traders concentrate on this one exclusively.

When you place a long bet on the GBP/USD, you are betting that the pound is strengthening and/or the dollar is weakening. This is because the pound sterling is the first currency named. The opposite is also true – if you place a short bet or sell GBP/USD, your bet is that the dollar will strengthen in comparison to the pound.

Some traders like to day trade on the GBP/USD. You can do the same thing with spread betting if you want, but be warned that this is a hazardous market for the beginner, and best avoided until you have some decent experience.

An alternative to day trading is to watch for particular items of news that will affect Cable. News items that generally affect currency values include unemployment figures, inflation figures, and general economic news such as the number of housing starts and sales, and if you are taking an active interest in spread trading the GBP/USD, you will probably want to diary when these figures will be released for each country. Some announcements may come as a surprise, but many are issued on set days of the month and can be anticipated.

Trading the news can have its own pitfalls, however. You may think it is obvious that if unemployment has fallen, and the economic outlook is bright, then the relevant currency will strengthen, but this is not always the case. Sometimes an announcement can be greeted with the value of the pair going the opposite way to that which you would expect. This is because the market tends to anticipate news, and will usually seek to price it in, sometimes even before any announcements. All right, unemployment fell, but did it fall as far as the market expected it to? That is the sort of question which you have to consider when you are trying to anticipate the rate moves for a profit.

Because of this, some people try to avoid trading at all when an announcement is due. Often there will be a great deal of volatility, and if you are not quick you can find yourself on the wrong end of the move. But given the active market in cable, you do not have to rely on news in order to find decent price moves. If you’re committed to financial trading, you should take steps to study technical analysis, which analyzes price movements and teaches how you can improve your anticipation of future price moves. The GBP/USD is no different from any other financial market, and you can learn a lot about the market sentiment simply by applying the techniques of technical analysis.

Spread Betting on GBP/USD Rolling Daily

The GBP/USD is one of the most traded currency pairs, and you will find plenty of volatility when you spread bet on the rolling daily. When you place a long bet, you are betting that the pound sterling will strengthen against the US dollar. With a rolling daily, the bet is automatically carried over from day to day, and a small charge for interest is made in the evening when it is rolled over. Provided you are not hanging onto the bet for weeks or months, the interest charge usually does not amount to much.

The current price for a spread bet on “cable”, the GBP/USD, is 15,403.7 – 15,406.1 with IG Index. Because it is a popular currency pair to trade, the spread between the buying and selling prices is not very large. If you think that the dollar is going to strengthen against the pound, which is betting against the pound, then you would place a short or sell bet. Say for example you staked £7.50 per point that the pound would weaken.

After a few days, you might see that the spread bet was quoted at 15,160.3 – 15,162.8. It is not unusual for this currency pair to move 100 points in a day. You close your bet and work out how much you have won. Here is how you figure it out: –

  • You placed your short bet at 15,403.7
  • The index fell, and you closed your bet at 15,162.8
  • The number of points that your short bet gained is 15,403.7 less 15,162.8
  • So you gained 240.9 points
  • Your stake was £7.50 per point
  • Multiplying these together, you see that you have won £1806.75

Quite frequently, the price will not go in the direction you anticipate, and you will need to close your bet before your potential losses become too large. Perhaps in this case the quote goes up to 15,482.6 – 15,485.1, and you decide that you don’t want to risk it continuing to climb and close your bet for a loss. In this case, you need to work out how much you have lost: –

  • You placed your short bet at 15,403.7
  • The price rose to 15,485.1 before you closed it for a loss
  • The total number of points you lost is 15,485.1-15,403.7, which works out to 81.4 points
  • Your stake was still £7.50 per point
  • Therefore you lost £610.50

Considering now the case when you think that the pound will go up against the dollar, you want to take a long bet at the outset, staking say £4.50 per point at 15,406.1. If the pound did indeed strengthen, you might close the bet when the spread bet quote was 15,542.1 – 15,544.6. In this case you have gained 15,542.1 less 15,406.1 points, which is 136 points. At your selected stake, your winnings work out to £612.

Once again, the price might have gone the wrong direction for your bet – say it went to 15,372.9 – 15,375.3 and you closed your bet to cut your losses. You lost 15,406.1 less 15,372.9, which is 33.2 points. For the same stake, you are down £149.40.

Spread Betting on GBP/USD Futures

If you decide to spread bet on the GBP/USD futures, then you are trading in one of the biggest markets in the world with the potential for large profits. Because of the leverage of spread betting, this also means you can suffer large losses, so be sure that you have a trading system that cuts any losses short before they impact your account too greatly.

If you look at IG Index for example, the quote for the far quarter (about six months away) of the GBP/USD is 15,515.1 – 15,526.8, although these values are changing every second. The spot price for “cable”, as is known, is about 15,540, with just a couple of points in spread.

Just by looking at these numbers, you can see the general market sympathy, which is for a slight decline in the pound and/or a strengthening in the dollar in the next few months. If you agree that the pound is going to decline, you still need to make a judgment of how much it will go down, and compare this to the offered prices so that you can decide which way to bet.

But say you think that the pound will not sink, and that the dollar may go down relatively over the next few months. You might place a long bet for £20 per point, at the price of 15,526.8. If the exchange rate does not change at all from where it is today, then you have a winner. But it’s fairly certain the price will go up and down a lot over the next few weeks and months. Provided it does not go down too far, you hope to stay in the bet and win when the price goes higher.

If you are proved correct, you may choose to cash in your bet when the spread bet quote rises to 15,723.2 – 15,732.9, for example. As it is a long bet, the bet closes at the lower price of 15,723.2. The total number of points you have made is 15,723.2 less 15,526.8, which amounts to 196.4 points. With your bet of £20 per point, you have won £3928.

Whenever you place a bet or trade, you need to know that how far you can let it go against you before it becomes too expensive, and threatens to cost too much. It is important to cut your losses, because if you lose too much money you will not be able to bet any more. Say you had figured out that the price might go down 30 or 40 points from general volatility, and had decided to get out of the bet if it dropped as much as 50 points, as it wasn’t working out as you had expected.

You placed the bet as previously, but the price went down to 15,472.1 – 15,483.4, and you closed the bet in case it fell any further. Once again the bet closes at the lower price, which in this case is 15,472.1. The number of points you have lost is 15,526.8 minus 15,472.1, which is 54.7 points. At your chosen stake, this means you lost £1094.