Finding a good Forex broker with a low spread is extremely important for the profitability of the trader, because every pip that you pay less means one pip more for each transaction. As a forex trader, your goal should always be to buy at low prices and sell at high prices. Modern brokers working in the Forex and CFD markets offer their customers different options for trading accounts that have different trading conditions with different ways of creating a spread. Here is a list of the Best Low Spread Forex Brokers who also offer tools and a good trading environment.
What is forex spread?
The difference between the purchase and sale price is called the spread and is measured in points. In addition to currency, the term is used on other exchanges. In this case, it implies the difference in the value of securities, options, futures, goods and other objects of trade. Accounting for the size of the spread is an important factor in trading, since a large spread brings a considerable share of the loss to the client during active trading.
As a rule, in the financial market, the spread is not measured in money, but in points. For example, if the current quote of the euro against the dollar is 1.4000/1.4003, then the difference between them will be 0.0003 dollars or 3 points. Depending on this, there are narrow spreads not exceeding 4–5 points, and wide ones, the value of which is above 5 points. To ensure liquidity of the foreign exchange market, the maximum spread is often set on exchanges. If the limit is exceeded, then trading is suspended.
What forex spreads are there?
Fixed represents the constant difference between ask and bid, which does not change under the influence of movements in the market. Usually it is used by traders who are simultaneously engaged in both buying and selling currencies. A fixed spread with an extension means that the price of one currency from a currency pair can change, while the price of another remains constant. A floating, or variable, spread is the difference in quotes, which changes under the influence of market fluctuations. Typically, a floating spread on an established market for popular pairs is 1-5 points, not more. During periods of turbulence rises to 50 points or more.
What does the forex spread affect?
Spread is a broker’s commission, which he sets for the positions opened by the trader. The smaller the difference, the greater the trader’s benefit from trading with a particular broker. The size of the spread is an indicator of the liquidity of the financial market, that is, with an increase in the difference between currency pairs, market liquidity decreases. With a large spread, traders will make sales at lower prices than they would like. For this reason, the most popular pairs have low values (for example: EUR/USD, USD/JPY, USD/CAD, GBP/USD).