How to Trade GBP/USD? Beginner’s Forex Guide

Summary: Trading GBP/USD, the foreign exchange (Forex) pairing of the British pound (GBP) and the U.S. dollar (USD), can be a rewarding venture, as GBP/USD is the third most traded Forex pair in the world, accounting for a bit under 10% of global foreign exchange turnover. To trade GBP/USD, investors can register an account at a Forex trading platform such as Plus500.

Recommended Multi-asset Broker for Online CFD Trading

• Reliable & Regulated by CySEC (#250/14) - Plus500 Ltd is a FTSE 250 company listed on the London Stock Exchange

• Wide range of instruments - CFDs on stocks, crypto, forex, commodities, ETFs, and more

• Low cost investing - No commissions and tight spreads.

• Transparent pricing on overnight funding, currency conversion fees, guaranteed stop orders, and inactivity fees.

• Advanced platform - Top notch analytical tools, real-time quotes, fast order execution, secure withdrawals

Over 24 million users since the inception of Plus500 Group

Get Started

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 80% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.

What Is GBP/USD Trading?

Various factors can affect the GBP/USD exchange rate. Those include interest rate decisions from the Bank of England and the Federal Reserve, broader economic data, and geopolitical events like the recent Brexit. 

How GBP/USD trading works

Currency pairs, like GBP/USD, are commonly quoted with a bid and ask price:

• The bid is the price at which you can sell (i.e., go short);
• The ask is the price at which you can buy (i.e., go long). 

The difference between the bid and ask prices is known as the spread, and lower spreads generally indicate greater liquidity. Thus, trading the pair with trustworthy brokers who offer competitive spreads is crucial if you wish to maximize your trading potential.

Understanding the different trading sessions is also crucial for success in GBP/USD trading. These sessions include the Asian, European, New York, and London sessions, the last one often being the most active for the pair. 

What affects GBP/USD prices?

Several factors can influence the value of the GBP/USD currency pair. Some of these factors include:

• Central banks and financial institutions: The Bank of England (BoE) and the United States Federal Reserve play significant roles in determining the GBP/USD exchange rate. For example, their interest rate decisions and policies can impact the value of both currencies and subsequently affect the pair’s price;
• Economic developments: Key economic factors, such as inflation figures, employment reports, and Gross Domestic Product (GDP) rates, can influence the GBP/USD exchange rate;
• Political events: The United Kingdom’s decision to leave the European Union (EU), for example, has affected and continues to impact the value of the British pound against the U.S. dollar;
• Trading Sessions: The GBP/USD pair has different levels of volatility during different trading sessions. The European session, for example, tends to be more active than the Asian session, which can influence the pair’s price.

How to trade GBP/USD

There are two main ways you can trade GBP/USD:

1. Via spot trading on a Forex platform;
2. By purchasing GBP/USD Contracts for Differences (CFDs) from a reliable broker.

1. Spot trading

Spot trading has traditionally been reserved for banks and large corporations. However, it has evolved over time, and it is now open to retail traders as well. Thanks to the accessibility provided by Forex trading platforms, individual investors can now easily partake in the secondary OTC market and exchange currencies from the comfort of their homes. 

In summary, spot trading is all about reacting to current market conditions and executing trades based on real-time exchange rates. Traders closely monitor various factors, including economic data, geopolitical events, and technical analysis, to make informed decisions in the volatile world of Forex.

2. CFD trading

For instance, traders can anticipate that the British pound (GBP) will become weaker compared to the U.S. dollar (USD). Then, they can initiate a short position to sell the GBP/USD CFD, only to buy it at a lower price later if the price really goes down. Finally, they can return the asset to the broker and keep the difference between the price at which they initiated the short position and bought the CFD again later on.

Traders can utilize margin to open leveraged positions, which means they can control a larger position size with a relatively smaller initial investment. While leverage can amplify profits, it is essential to be aware that it also magnifies potential losses, making risk management a critical aspect of CFD trading.

Where to trade GBP/USD CFDs

Forex CFD trading has become rather popular, so there are a good number of brokers out there that provide investors with all the tools necessary to explore this trading venue. Our go-to broker for Forex CFD trading is Plus500, a user-friendly trading platform that offers CFD trading on currency pairs, including GBP/USD, and comes with features such as: 

• Free demo accounts;
• Multi-asset Contracts for Differences (CFDs) on over 2,000 financial instruments, including Forex;
• Mobile app for convenient on-the-go trading;
• Convenient deposit options including PayPal, Visa, and Mastercard;
• Free withdrawals.

To trade GBP/USD at Plus500, you can:

• Sign up: Visit the Plus500 website and create a new account by providing your personal information and verifying your identity;
• Deposit funds: Fund your account using accepted deposit methods, such as a credit card or bank transfer;
• Select GBP/USD from the list of currency pairs: On the main platform, locate the search bar in the upper right corner and type in “GBP/USD” or “Cable.” Then select the pair from the drop-down menu;
• Place an order: Choose the Buy or Sell buttons to initiate a long or short trade, respectively;
• Monitor and close your trade: Keep track of your GBP/USD trade and modify your strategy as needed.

Recommended Multi-asset Broker for Online CFD Trading

• Reliable & Regulated by CySEC (#250/14) - Plus500 Ltd is a FTSE 250 company listed on the London Stock Exchange

• Wide range of instruments - CFDs on stocks, crypto, forex, commodities, ETFs, and more

• Low cost investing - No commissions and tight spreads.

• Transparent pricing on overnight funding, currency conversion fees, guaranteed stop orders, and inactivity fees.

• Advanced platform - Top notch analytical tools, real-time quotes, fast order execution, secure withdrawals

Over 24 million users since the inception of Plus500 Group

Get Started

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 80% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.

Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk. 

FAQs about how to trade GBP/USD

Recommended Multi-asset Broker for Online CFD Trading

• Reliable & Regulated by CySEC (#250/14) - Plus500 Ltd is a FTSE 250 company listed on the London Stock Exchange

• Wide range of instruments - CFDs on stocks, crypto, forex, commodities, ETFs, and more

• Low cost investing - No commissions and tight spreads.

• Transparent pricing on overnight funding, currency conversion fees, guaranteed stop orders, and inactivity fees.

• Advanced platform - Top notch analytical tools, real-time quotes, fast order execution, secure withdrawals

Over 24 million users since the inception of Plus500 Group

Get Started

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 80% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.