The GBP/USD currency pair, known as Cable, trades approximately $250 billion daily. UK traders use spread betting and Contract for Difference (CFD) trading to speculate on price movements. Understanding the cost structure of each is essential before choosing a trading method.
Spread Betting Costs
Spread betting on GBP/USD involves a spread—the difference between bid and ask prices. If GBP/USD trades at 1.3000, a provider might quote 1.2995-1.3005. Buying at 1.3005 and selling at 1.2995 costs you 0.0010, or £9 per £10,000 traded at 1:1 leverage.
IG Index and CMC Markets typically offer spreads of 0.9-1.4 pips on this pair. A trader opening a £10,000 long position at 1.3005 with a 0.9 pip spread and closing at 1.3050 makes £450 profit before costs. The spread cost of £9 reduces net profit to £441.
CFD Trading Costs
CFD providers quote similar spreads—typically 0.8-1.2 pips for GBP/USD—but add overnight financing charges ranging from 0.5% to 2% annually. A £10,000 position might incur £2.50 daily in financing fees (0.025% per day).
The same £10,000 trade closing at 1.3050 generates £450 profit. After the 0.8 pip spread cost (£8) and one day's financing (£2.50), net profit falls to £439.50. Longer holding periods increase financing costs significantly.
Which Costs Less?
Spread betting offers a small advantage for short-term trades. The example above shows £441 net profit versus £439.50 for CFDs. However, spreads and financing rates vary by provider and market conditions, so direct comparison matters more than these figures.
Leverage amplifies costs in both methods. At 10:1 leverage, a £1,000 trade becomes £10,000 in exposure, raising both spread costs and CFD financing proportionally. Higher leverage doesn't just magnify profits—it magnifies your fees.
Position Sizing Strategy
Position size directly controls your costs. A £1,000 trade at 0.9 pips costs £0.90, while £10,000 costs £9. Smaller positions reduce fees but limit profit potential. Balance these two factors based on your account size and risk tolerance.