Greater London, England -- (SBWire) -- 08/26/2010 -- To the untrained eye, CFD trading and spread betting appear very similar. This is because they really are very similar. However, they also differ in ways that can make either spread betting or CFD trading a better fit for you as a trader.

City Index’s Joshua Raymond sees a difference in the fact that CFD trade profits are subject to capital gains tax, while profits from spread betting are not. “However, you can offset losses in a CFD trade used as a direct hedge, which is why some traders prefer CFDs to hedge”*.

Another contrast is that spread bets are monetised in your base currency, whereas CFD trades are monetised in the underlying market currency. This makes CFD trades party to currency fluctuations, so spread betting can be viewed as more transparent, particularly for beginners.

Finally, there is the opinion that CFD trading simply sounds more professional. In reality, the products are very alike, but the term ‘spread betting’ occasionally alienates traders.

This said, the two aren’t necessarily mutually exclusive. As Raymond points out: “At City Index you can spread bet and trade CFDs through the same platform. Many of our clients do just that.”

Spread betting and CFD trading can result in losses that exceed your initial deposit. *Tax laws are subject to change and are dependent upon individual circumstances. For more information, visit http://www.cityindex.co.uk