The pound can often move in wide bands – sometimes falling, and other times rising. By predicting that the pound is likely to fall, you can make a profit by shorting it. However, if you’re wrong, you can also lose money. This article will give you some tips to help you trade pound-based CFDs and effectively spread bets. How to Short the Pound.

How to Short the Pound: A Guide for UK Traders

When traders go long on a currency pair, they buy the base currency and sell the quote currency. This is in the hope that the base currency will appreciate against the quote currency. When you short a currency pair, it’s the opposite: you sell the base currency and buy the quote currency. You can then realise a profit when the price of GBP/USD falls after you’ve opened your position, because fewer US dollars are needed to buy one pound than they were before the price fell.

Trading a CFD (Contract for Difference) is the most common way for retail traders to short-sell currencies. Unlike futures and options, a CFD is always cash-settled, meaning that your profit or loss is based on the difference between the price at which you sold and bought the instrument. You can also choose to use a stop-loss and/or a profit target order to help you control your risk and limit any losses. With XTB, you can trade CFDs on the most popular forex pairs, including GBP/USD. XTB is regulated in the UK by the FCA and offers FSCS protection up to £85,000. You can open an account with XTB here.