Forex minus the fees?

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Wouldn’t it be great if you could trade forex without incurring a fee? And wouldn’t it be equally fantastic to find a way to trade stocks on the same basis tax free?

The old adage is that if it sounds too good to be true it probably is, but in this case it is at least pausing for a moment to see what is being offered. Committed traders will have established strategies and dealing mechanisms in place – they may even be enjoying preferential rates on the basis of the volumes they trade – but for the smaller, less established but more nimble investor there are alternative investment vehicles that can significantly streamline the process.

Originating out of the dealing rooms of London, Financial Spread Betting providers such as Tradefair have achieved a means for their clients to trade Contracts for Difference (CFDs) rather than the stocks themselves. Operating on a spread basis – 1 staked unit per market point move – Tradefair and their like are able to offer short term opportunities to leverage market movements either up or down. There is an equal facility to trade long and short with no complications either way. Essentially the same mechanism – with minor differences – applies to forex.

The initially recreational thrust of these offerings is becoming more and more geared towards serious investors as the potential to capitalise market insight devoid of any tax implication are more widely appreciated. For example, the Tradefair PRO suite of analytics offers over 80 different analytic indicators, charting tools and news and RSS feeds,  as well as the means to place trades instantaneously.

At the same time, more cut down versions of the software are available, enabling users to trade via a simple smartphone, if that is their preference. It means that there is no physical bar to trading, wherever a user happens to be. The days of traders being tied to their desks may be numbered.

The range of markets is by no means restricted to forex, although this is a significant part of what is presented. In the case of Tradefair access is provided to over 3,200 different international stock and currency markets; in addition the possibility to bet on generic market indices is also provided. Such an array of market options inevitably extends the potential to cross-trade – for example trading those stocks which are particularly sensitive to currency movements.

If this scenario does not satisfy the requirements for being too good an avenue to explore, it is perhaps worth considering the competitive environment in which firms like Tradefair, and competitors such as city index, sspreadex.xom and ig.com are operating. In what is a relatively new and fast expanding marketplace the capture and retention of new users is a key concern. Correspondingly potential users are currently being offered some seriously tempting inducements to start trading.

At the time of going to press Tradefair are offering up to £1,000 as an introductory bonus – subject to an initial deposit of £10,000. For anyone confident in their ability to trade intelligently that instant 10% return represents an eye catching opportunity. There are further, additional bonuses of £50 on offer should a user introduce a bona fide new user to the site (maximum five). Whilst the terms and conditions applying to these offers are quite binding, for anyone already familiar with the trading environment these, again, represent added value to a proposition that already has a lot to recommend it.

The downside to the Financial Spread Betting phenomenon applies particularly to those unfamiliar with forex trading. The fact that bets lose according to the same calculation as they win is a not insignificant factor. It can make for painful experiences for those too slow, or too optimistic, to cash out when the market starts running counter to their staked positions. But despite this necessary word of caution, first impressions suggest there is every reason to seriously consider FSB as an investment mechanism with plenty to recommend it – even if it isn’t entirely too good to be true.