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what kind of spreads do you look in a broker

forextrader777
Feb 09 at 11:38
78 posts
wantspips posted:
LyudmilLukanov posted:
Traders also should look tight spreads. During Volatile market spreads often become wider than usual.


Absolutely right. This principle also applies to the pairs that typically have more volatility all the time, like the NZD or GBP pairs. Traders need volatility to make money. Volatility is a good thing, regardless of what they tell you on CNBC. Once a trader takes a position in a currency pair, price needs to move in order for it to make money. Traders therefore tend to gravitate to trade the pairs that move the most day after day.
Brokers know this and will exploit it by increasing the spread/commission required to trade more volatile pairs, especially around the time of fundamental announcements and daily rollover (usually around 5pm to 6pm EST - which is UTC minus 5). The spread can go from 1.5 pips to 10 or 15 or even 20 pips!

Therefore, when researching brokers, don't just look at their claims of offering 0.0 pips on EUR/USD. That's the bait, and as any fisherman knows, bait is always accompanied by a hidden hook! Brokers are in business to make money, and you WILL pay transaction costs one way or another, either upfront, or through other more serpentine ways. You should have a better experience sticking to large, well-regulated brokers, even if you pay 2 or 3 pips per trade.

Think about the math.
Most forex traders have an account funded with less than $2000.00. Each trade you put on should risk less than 2-3% of your capital. That means if you have a stop loss of 50 pips in order to make a return of 100 pips, and you have 200:1 leverage in your account, you should not be trading more than 8 to 10 micro lots. That works out to be about 80 to 100 cents per pip. For each trade on, lets say, GBP/NZD, you are paying your broker about $2.40 to $3.00 if your spread is 3 pips.
That's not a lot!
If your broker offers 0.0 pips spread, but charges you a commission of $3.50 on every trade, you are actually PAYING MORE in transaction costs! This is the reality for most beginning forex traders, and I would suspect that a large percentage have accounts that are $500.00 or less, which means the problem is magnified even more.

Therefore, I would recommend that if you are searching for a quality broker to start trading forex with, stick to the large, well-run, well regulated brokers that offer you a simple, reasonable pip spread with zero commisions and STP (Straight-Through-Processing).
Happy Trading!

Very well explained buddy.
Getting tight spreads and low commission are obviously a great deal for any trader.
I too prefer well regulated, STP brokers.

Sarjohn (Sarjohn)
Feb 10 at 08:54
124 posts
I would prefer variable and tight spreads starting from 0.0 pips and commission should be low.

Joao91
Feb 10 at 10:54
18 posts
I always prefer tight spreads & low commission, which is why I am trading with fxview.
Good spreads – average 0.2 pips on majority of pairs
Low commission - $1 per lot per side

Ramierez
Feb 10 at 14:22
20 posts
I'm a scalper, so I prefer trading with a broker with tight spreads starting from 0.0 pips in major currencies like EURUSD, GBPUSD, JPYUSD etc... and my current broker of choice that provides the criteria I require is FP Markets.

GordonDenzil
Feb 11 at 14:43
22 posts
I'm a scalper, so I prefer trading with a broker that has really tight spreads starting from as low as 0 pips in most major currencies. It will be an advantage if the broker's spreads are stable during volatile market situations.

Parker09
Feb 20 at 12:02
16 posts
I'm looking to scalp, so my main criteria are tight spreads in EURUSD with lower slippage. Currently, anyone trading with such brokers?

UweMoench
Feb 21 at 06:19
354 posts
Personally I like zero spreads account where spreads starts from zero. I am ready to give commission. But trade execution should be instant without any requote.

richardmarcus
Feb 22 at 04:38
104 posts
Sarjohn posted:
I would prefer variable and tight spreads starting from 0.0 pips and commission should be low.

do these kind of brokers usually exists?

ele020 (ele020)
Feb 22 at 04:48
158 posts
UweMoench posted:
Personally I like zero spreads account where spreads starts from zero. I am ready to give commission. But trade execution should be instant without any requote.

Do you have any broker in mind offering such a trading environment? I also prefer low spreads but if low spreads come along with low commissions its like a cherry on the cake

The more your practice, the more you learn.
Andronn
Feb 23 at 08:51
74 posts
In principle, even the floating spread suits me, the most important thing is that it was quite minimal.

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