Direct answer
Forex trading is not inherently only CFD or only spread betting. Many platforms let you trade forex using different product structures, most commonly CFDs (contracts for difference) or spread betting. Which one applies depends on the specific instrument and the provider’s contract terms, not just on the fact that the underlying market is foreign exchange.
How it works: definitions and bid/ask impact
A CFD (contract for difference) is a contract whose value tracks the change in a referenced price. If the contract moves in the referenced direction, the contract value adjusts accordingly, and settlement depends on the platform’s CFD rules.
Spread betting is typically structured as a bet on the movement of a price (often quoted as a spread). The payout or settlement is tied to how the referenced price changes over the trade, again according to the provider’s spread-betting terms.
For both CFDs and spread betting, bid/ask spread matters because you normally enter using one side of the quote (buy at ask, sell at bid) and exit using the opposite side. That means there is an immediate difference between the effective entry and exit prices, which can outweigh small movements.
If you are comparing costs, focus on the combination of spread width (often visible as bid/ask spread), any additional fees stated in the contract, and the contract’s pricing/settlement rules.
Comparison checks: what to verify before deciding which it is
Use the provider’s instrument page and the contract specification to answer these checks:
- Contract description: Does the instrument explicitly call itself a CFD, or does it describe spread betting?
- Settlement wording: Are you participating in a contract for the difference in value, or is it described as a wager/bet settled by reference to price movement?
- Quoted pricing: Is the product quoted with bid and ask prices like standard dealing quotes, and how is that linked to the cost of entry?
- Instrument naming: Some platforms label forex instruments as “CFD on [pair]” or “spread betting on [pair]”. Naming helps, but the contract terms are the final check.
These checks are independent of the underlying currency pair. The currency market still has a bid and ask concept, and the provider’s product structure determines how you trade and settle against those movements.
Relevant limitations and risks
This explanation is conceptual and does not assume your specific broker, jurisdiction, or account features. The exact mechanics vary by provider and by instrument terms, especially around settlement, fees, and how pricing is calculated.
Because we are not using real-time data here, you cannot infer current spreads or current costs from general explanation. You also cannot predict future outcomes: forex price changes, spread changes, and execution conditions can move in ways that affect both gains and losses.
To independently confirm whether a particular forex instrument is a CFD or spread bet, verify the product’s contractual description and settlement method in the instrument documentation.