When you start trading in the Foreign Exchange Market online, you will find that the Forex brokers out there won’t charge you. Even the conventional forex brokers will not charge you. However, they are not offering services for free. They actually make money by charging a “spread” from the trader. So, what exactly is this spread?
What is a spread? What should you know about it?
The spread refers to the difference between the bid price and the ask price involved in your trade. The broker adds the spread with the price of trading and keeps it as his trading fee. The broker’s fee, thus, is often considered to be a hidden commission. All the brokers have these hidden commissions. So, if it is very important to find a low spread forex broker before you start trading. How exactly can you zero in on a low spread forex broker? Read on to know more.
Choosing a Trading Platform: What should you know about it?
There are several online trading platforms offering trading opportunities to experienced traders and rookies. You should be able to identify the low spread trading platforms from there and go on to select one among them. Here are a few tips which might help you.
Identify currency pairs which have low spreads
The top currency pairs— GBP/USD and EURO/USD typically have the lowest of spreads around. Now, different brokers will offer different spreads on different types of accounts. If you are trading with a low spread Forex trading platform, it might not exactly offer very good mini trading opportunities and might carry higher spreads than a full contact account does.
Check out if the trading platform is transparent enough or not
An ideal low spread trading platform should be transparent enough to let you know about the actual prices so that you have a clear idea about the spread. The trading platform should show you live prices instead of indicative quotes.
Do you know how the spread works?
Make sure you have a thorough understanding as to how the spread works. For instance, if you are interested in selling a currency pair (having a 3 pip spread between the Bid Price and the Ask Price) immediately after buying it then you would be down 3 pips. This will happen even if you are selling without making a profit or loss (i.e. when the market price is exactly the same when you are buying and selling).
Does the trading platform help you trade on a fractional basis? Here’s what you would want to know
A low spread trading platform might typically enable forex traders to trade on a fractional basis. If you want you can trade 325911 units instead of full 300,000 units. This turns out to be very helpful for traders who are interested in risking in certain percentage their balance on each of the trades.
Choose a user-friendly platform
No matter which trading platform you end up choosing you should ensure that it is easy to use.