What is considered a Low Spread in Forex?

Paulsy

Well-known member
Usually, the spread offered by some brokers appears to be very small, a few pips at most. However, if a trader is trading on margin and holding large positions, spreads can easily accumulate to a significant operating expense for the trader. This is the reason why you should always choose a low spread forex broker. The primary advantage of choosing a low spread forex broker is that it allows you to reduce your trading costs by a significant amount. The smaller the spread, the lower you can buy, and the higher you can sell when compared to a broker whose bid and ask spreads are higher.

For example, consider that Broker A offers an average spread of 0.15 pips on the EUR/USD pair, and Broker B offers an average spread of 0.10 pips on the EUR/USD pair. Comparably Broker B would make a good place to start if you're looking for a low spread. The lowest possible spread offered by a Forex broker is 0 to 1 pip.

However, while a low spread may seem attractive, it's important to realize that brokers will not provide their services for free, and there is usually a trading commission involved. Make sure you familiarize yourself with the Forex trading costs before looking for a low spread Forex broker.

What makes Low Spreads important in Forex trading?

Low spreads can be advantageous to traders in many ways. Primarily, trading with low spreads will keep your trading costs low, thus making your entry and exit points more convenient. By choosing a low spread Forex broker, traders can trade assured that the difference between the Ask and Bid prices will remain constant no matter how much the markets fluctuate.

Trading with a low spread proves to be very useful when it comes to planning trading costs, enhancing forex risk management, and limiting the trader's exposure to high costs. Low spreads are best suited for beginners, scalpers, and short-term traders.

Benefits of choosing a Low Spread Forex Broker

One of the biggest advantages of choosing a low spread forex broker is the reduction of upfront costs. Since the spread functions as a form of commission that forex brokers charge, lower spreads mean lower trading costs for you. Furthermore, low-spread brokers allow the execution of direct trading, which means that the quotes they provide are close to current market rates.

Low spread brokers make it easier to calculate the potential profits and losses from each trade you place, enabling you to develop a more informed trading strategy. Especially if you are a day trader who makes money from numerous incremental price movements in currency pairs, a lower spread forex broker should definitely be a top priority. Get the lowest possible spreads on all major currencies ranging from 0 to 3 pips when you open a forex account with AximTrade.

Factors to consider while choosing a Low-Spread Forex Broker

It is crucial to carefully do your own research while you look for a low spread forex broker, as a promise of low spreads does not ensure that a given broker offers the lowest trading costs for your strategy. Be aware of the following situations:

  • The spreads offered by brokers usually depend on the type of trading account and the currency pair you trade. Some scam forex brokers might entice traders with the promise of offering a low dealing spread in exchange for a high commission. So, it is crucial to make sure you are aware of all the trading costs involved.
  • Some forex brokers that offer you a low spread to trade can require a high minimum deposit to open a position. As a result, it is a good idea to familiarize yourself with the minimum deposit requirements of a broker. Opening a forex account with AximTrade requires just $1 as a minimum deposit. Check out the AximTrade review to find out the broker's reputation in the financial market.
  • It is also possible that some low-spread forex brokers may offer you a low-quality trading platform with limited currency pairs and instruments that are completely fraudulent. Make sure the broker you choose is providing an authenticated trading platform, like MetaTrader (MT4) and offers you full access to all the indicators and currency pairs required for successful trading. With AximTrade, you can trade 49+ forex currency pairs and various indicators over the MT4 platform.
Despite the fact that spreads are different from commissions, both serve the same purpose as compensation for forex brokers. Failing to consider the potential trading costs can reduce your overall profit substantially and can drastically affect your portfolio performance.
 
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