Betting on international currencies is rapidly becoming a larger part of bookmaking operations. That’s because the daily turnover in the world’s currencies is driven by speculation for profit, providing massive opportunities to make gains on even slight changes in the value one currency relative to another.
The market where banks, companies and speculators buy and sell currencies is known as “Forex,” which stands for foreign exchange. Commonly abbreviated as FX, it is the world’s most traded market, open 24 hours a day on Monday through Friday. What’s more, Forex is characterised as an “over-the-counter market.” That means unlike stocks and commodities it is decentralised and has no central exchange.
In a traditional Forex transaction, a trader will buy one currency while simultaneously selling another. The currencies are traded in pairs, and 85% of daily Forex trading volume revolves around the biggest and most liquid currency pairs, known as “the majors.” These include the Euro versus the U.S. Dollar (EUR/USD), Sterling versus the U.S. Dollar (GBP/USD) and Euro versus Sterling (EUR/ GBP).
Other popular trading pairs include combinations with the Japanese Yen (JPY), Swiss Franc (CHF), Canadian Dollar (CAD) and Australian Dollar (AUD). Apart from the majors, trading is also possible on a host of so-called “exotic pairs,” which are composed of minor currencies that are less heavily traded, such as the Singapore Dollar (SGD), the Mexican New Peso (MXN), the Polish New Zloty (PLN), and so on.
The enormous liquidity of currency markets is a primary reason for the popularity of Forex trading. Bid-offer spreads are relatively small compared to other asset classes, and they are always tightest on the major pairs, where there the most liquidity exists.
Currencies market betting is a spin-off from traditional Forex trading. It does not require the bettor to actually buy or sell any currencies. Instead, wagers are made on whether certain changes will occur over a specified period of time, such as one currency in a pair increasing or decreasing in value relative to the other by a given deadline. It is also possible to bet on the degree of change in value as well as on ranges into which the final exchange rate will fall.
At ladbrokes, which offers Fixed Odds Betting on FX markets provided by Cantor Gaming & Wagering Limited, the spot FX price is a composite 5-decimal place price derived from rates provided by several banks. Wagering on the GBP/USD exchange rate, for example, can be conducted in intervals of as little as two minutes or as long as a full day. Settlements are made no later than 15 seconds after the stated expiry time.
At IG Index, Spread Betting is the most common form of wagering on the Forex market. For major currency pairs, bets as little as 50p per point are accepted, so that for every 1-point (or pip) movement in the Forex rate, the bettor stands to win or lose 50p. As an example, a 100-point move on any of the major pairs is considered reasonably large; it would result in a gain or loss of £50.
Another method of currencies market betting offered at gnuTrade is called “Back a Player.” Instead of wagering on a currency pair directly, the bettor may back a professional Forex trader in any designated currency. Backing bet returns are “based on the percentage change in value of the backed player portfolio during the period of the bet.” The bettor receives 90% of the backing profits if the backed portfolio rises, and the backed trader receives 10% on top of the profit of his/her trade. If the backed portfolio falls, the percentage loss is deducted from the backing bet amount.