Spreads are one of the biggest costs during Forex trading. It can also change the direction of the order. You can give up closing a process that you are about to close because of spreads. Because your expectation has been realized and your transaction may have reached the target TP level. However, at this level spreads may prevent you from profiting.
For all these reasons, investors prefer the recent update of the low-spread forex brokers in 2023. What is the cost of spreads to investors? Let’s calculate together.
Spread is the difference between an asset’s buying and selling price. These prices are known by traders as bid and ask prices. The price of an asset has 4 decimal points. The fourth decimal point represents the pips. In the image below you can see an example of EURUSD.
1 pip on EURUSD is equivalent to 10 dollars for a standard lot of 100,000 units. If the broker you work with offers you 3 pips spread for EURUSD, you will pay a spread of $30 for each trade.
But let’s consider a forex broker offering 0.6 spreads. In this case, they will be included in the low-spread forex brokers, where you can have a profit of $24 per trade. For an investor entering 10 trades per day, it would cost $240 less per day.
Some investors are the type called scalpers. They open a lot of trade in a few hours. They benefit from the advantage of high leverage. After making a small profit for each trade, they close the order. This system is called scalping. Some brokers offer ECN accounts for this investor type. Ultra-low spread is offered in ECN accounts as part of Low spread forex brokers scalping. However, the commission is charged by the broker.
Some Low spread forex brokers offer good trading conditions. However, you need to thoroughly review the reliability criteria of these brokers. Because unlicensed and unregulated Low spread brokers have the advantage of offering very low spreads. I recommend you stay away from these brokers.
A low-spread forex broker is one that is both regulated and at the same time offers good trading conditions with a variety of choices whether that is trading accounts, depositing and withdrawal and trading instruments or bonuses.
Some forex brokers with low spreads might have some higher conditions for trading and some might have acceptable terms for investing so make sure to check the trading conditions of the broker you have in mind before actually opening an account.