Forex trading with lowest spreads

Low Spread Forex Brokers.

Choosing a forex broker can be a daunting task. Finding an appropriate business partner that will provide access to the currency trading market at a reasonable cost, will protect your funds at all times through best business practices, and that will respond quickly and effectively when you have a question is not easy, especially when you must deal with someone you may never see “face-to-face” or that resides overseas.

Unfortunately, many traders focus too heavily on cost factors, preferring to go for the broker that advertises “the tightest spreads in the industry” or “near zero spreads on most major pairs” . The facts are that brokers understand their cost structures extremely well or they would never venture into such a business venture. Their objective is to recover their costs in one way or another, the point being that if they subsidize very low spreads, then they plan to make up the difference somewhere else, either in other fees, slippage and poor execution, or low quality customer service and support.

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- Tight Spreads as low as 1.2 pips.

Does the broker type favor low spread offerings?

Forex brokers basically come in two types – ECN brokers or brokers that are market makers. The former passes through your orders directly to its liquidity providers to be executed at their prevailing spreads, which may vary over time depending on supply and demand, but tend to be razor thin. ECN’s may offer a lower spread, but they recover their costs in other ways through commissions or transaction-based pricing. Depending on your trading style and level of activity, an ECN’s pricing structure, when looked at on a total “all-in” basis, may actually be a lower alternative than the typical market maker type of broker.

A market maker, on the other hand, makes his income totally on the “Bid/Ask” spread, which is multiplied if you elect to employ leverage in your trading strategy. This type of broker acts as an intermediary between you, his client, and his bank or broker liquidity providers, choosing rather to “arbitrage” for profit the spread that he offers to you against what he can buy and sell in the market on his own behalf. Each day, the firm maintains an instantaneous accounting of the “overs” and “shorts” for each currency pair. If he is losing at one point, the spread will be slightly increased to make up the difference over time, but the objective is to hit a profit target for each pair at the end of each day.

What to be wary of when choosing a low spread forex broker?

In the business world, all competitors choose to compete either on cost or on quality of service. One cannot be the best at both. In other words, if a forex broker offers “the lowest spreads in the industry”, then it stands to reason that the firm is cutting back on its quality in some other department, will charge other hidden fees that are not immediately apparent, or will resort to bad business practices to disguise its recovery of costs in an unscrupulous manner.

The latter item should be a true concern when low spreads are offered. The first two items will reveal themselves in your due diligence phase of review by comparing the broker’s offerings to the competition and by reviewing customer testimonials or independent reviews of the broker. Bad business practices, however, are more insidious, in that you are at the mercy of your broker. Your only recourse may be to terminate your business arrangement and, hopefully, withdraw your account balance without any delay.

Bad business practices tend to show up in many ways. The first may be in constant re-quoting. You see a quote you like, act upon it with an execution order, but all you get back is a server message with a different quote asking you to try again. The broker chose to block your first request for his own profit reasons, although if you waited beyond an acceptable period of time to act, then the broker may well have been within his rights to re-quote.

Slippage is another practice that can spoil your trading experience and lead to unwanted losses of your precious capital. Slippage results when you send an execution order at a stated price, but it gets executed at another one. The broker will argue that the market is volatile or that you delayed in acting or that a major data release caused the market to abruptly change, but if none of these situations are at hand and slippage occurs frequently, then it is time to question your choice of broker.

Lastly, perhaps the most frustrating bad practice is spread manipulation. Your broker, if he is a market maker, can post whatever quotes are in his best interest at any time. Setting spread quotes is what a market maker is all about, but the unscrupulous ones may suddenly enter quotes that are not necessarily seen anywhere else in the market, i. e., from an independent Reuter’s quote feed or another broker. This manipulation most often occurs when the market is in a tight range. Brokers do not make money under these conditions. When orders start to appear for a big move, the quotes may first go in the opposite direction, roughly 20 to 30 pips, just the right amount to clear out any stop-loss orders and to prevent traders from benefiting from the move. The broker then pockets the profit from those closed client positions in this case.

Concluding Remarks.

No one is suggesting that all low spread brokers are bad, just that you should be aware that a low spread broker must make up the difference in some other area. You may not need education materials or customer support. You may want a broker that truly focuses on a low spread and is willing to cut corners in other areas, as long as the firm adheres to best business practices in its execution of your orders.

At the end of the day, spread is important in your broker choice, but you should strive to understand where other hidden costs might be and whether the quality of service might be low, the first complaint that is typically raised in customer testimonials on the Internet. Take your time on the front end to choose your broker wisely.

Best Forex Brokers With Low Spreads.

One term with which experienced Forex traders are well acquainted and with which new traders need to become well acquainted with is spread . Simply defined, spread is the difference between the buying price and the selling price of a currency pair. It is the cost paid by the trader to the broker in exchange for access to the currency trading market. In two very practical senses, the spread means that every Forex transaction initiated will be losing by the amount of the spread the moment the trade is executed and that the amount of the spread is added to losing trades, but deducted from winning trades. Whether the broker is of the market maker variety, or is an Electronic Clearing Network type, a low spread means that the cost of trading is also low. Depending where a broker is based, the spread for a particular currency pair might be higher for one broker versus another, so it is a good idea to look at the spread for currency pairs that you intend to trade and not just the EUR/USD, which typically has the lowest spread offered by any broker.

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Low cost trading with tight, fixed spreads Loyalty rewards: Earn cashback as you trade Choose Forex, CFDs or spread betting.

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Risk Warning.

Your capital is at risk. Trading in Forex and Contracts for Difference (CFDs) is highly speculative and involves a significant risk of loss. The information contained in this publication is not intended as an offer or solicitation for the purchase or sale of any financial instrument. This website is provided for informational purposes only and in no way constitutes financial advice. A featured listing does not constitute a recommendation or endorsement.

Forex Brokers.

About ForexTradingpany.

Forex Tradingpany was established to provide global traders a deep and insightful source of information on forex trading, its key strategies and indicators. With guides for everyone from beginner traders in Bangladesh to advanced strategists in Hong Kong we want the world trading community to benefit from our in-depth broker reviews, features, and commentary. We list the world's top regulated and authorised brokers suitable for a global audience.

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Spreads.

Tight Spreads as Low as 0 Pips.

Tight spreads as low as 0 pips on all major currency pairs.

100+ Financial Instruments.

Trade with NO hidden fees.

The lowest possible spreads for all trading account types.

Best Execution Policy.

Fractional pip pricing.

7 Asset Classes - 16 Trading Platforms - Over 300 Instruments.

Trade Forex, Individual Stocks, Commodities, Precious Metals, Energies, Equity Indices and Cryptocurrencies at XM.

To keep spreads as narrow as possible, we aim to get optimal prices from all our liquidity providers. Real time prices are aggregated from liquidity providers in order to offer best bid and ask prices to clients. Our electronic pricing engine allows us price updating on every currency pair three times per second, and thanks to this our prices reflect the current global forex market levels.

John Papatheodoulou, Chief Dealer - XM Group.

XM offers tight spreads to all clients, irrespective of their account types and trade sizes. We recognize the fact that tight spreads only make sense for our clients if they can trade with them. This is the reason why we attribute great importance to our execution quality.

Fixed or Variable Spreads?

XM operates with variable spreads, just like the interbank forex market. Because fixed spreads are usually higher than variable spreads, in case you trade fixed spreads, you will have to pay for an insurance premium.

Many times, forex brokers who offer fixed spreads apply trading restrictions around the time of news announcements – and this results in your insurance becoming worthless. XM imposes no restrictions on trading during news releases.

Fractional Pip Pricing.

XM also offers fractional pip pricing to get the best prices from its various liquidity providers. Instead of 4-digit quoting prices, clients can benefit from even the smallest price movements by adding a 5th digit (fraction).

With fractional pip pricing you can trade with tighter spreads and enjoy most accurate quoting possible.

XM Spreads / Conditions.

To view XM Spreads / Conditions for FX Instruments ->Click Here To view XM Spreads / Conditions for Commodities Instruments ->Click Here To view XM Spreads / Conditions for Equity Indices Instruments ->Click Here To view XM Spreads / Conditions for Precious Metal Instruments ->Click Here To view XM Spreads / Conditions for Energies Instruments ->Click Here.

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Legal: This website is operated by XM Global with registered address at No. 5 Cork Street, Belize City, Belize, C. A.

XM is a trading name of Trading Point Holdings Ltd, which wholly owns Trading Point of Financial Instruments UK Ltd (XM UK), Trading Point of Financial Instruments Pty Ltd (XM Australia), XM Global Limited (XM Global) and Trading Point of Financial Instruments Ltd (XM Cyprus).

XM UK is authorized and regulated by the Financial Conduct Authority (reference number: 705428), XM Australia is licensed by the Australian Securities and Investment Commission (reference number: 443670), XM Global is regulated by the IFSC (60/354/TS/17) and XM Cyprus is regulated by the Cyprus Securities and Exchange Commission (reference number: 120/10).

XM Global (CY) Limited with offices at Galaxias Building, Makariou & 36 Agias Elenis, 1061, Nicosia, Cyprus.

Risk Warning: Forex and CFD trading involves significant risk to your invested capital. Please read and ensure you fully understand our Risk Disclosure.

Restricted Regions: XM Global Limited does not provide services for citizens of certain regions, such as the United States of America, Canada and Israel.

Risk Warning: Your capital is at risk. Leveraged products may not be suitable for everyone. Please consider our Risk Disclosure.

Forex Spreads.

One simple method we can use, in order to begin to understand the concept of spreads in the forex market, is to consider the times when we change our holiday currency at a bureau de change. We are all familiar with exchanging our domestic currency for holiday money; pounds to euros, dollars to euros, euros to yen. In the window on the bureau de change, or on its electronic board, we will see two different prices, the bureau is effectively stating; "we buy at this price and we sell at this price." A quick calculation reveals that there is a gap in values and prices there; the spread, or the commission. This is perhaps the simplest example of a forex spread that we see in our daily lives.

The simple definition of a "spread" is the difference between the buying and selling price of a security. It can also be regarded as one of the costs of doing business when trading. The spread in the forex markets can be described as the difference between the various buying and selling prices on offer for any particular currency pair. Before any trade actually becomes profitable, forex traders must first account for the cost of the spread, automatically deducted by the broker. A lower spread naturally ensures that successful trades will move into profitable territory earlier.

In the forex markets investors are still exchanging one currency for another, trading one currency versus another. Traders use a certain currency to take a position versus the other currency, betting that it will fall or rise. Therefore, currencies are quoted in terms of their price in another currency.

In order to express this information easily, currencies are always quoted in pairs, for example EUR/USD. The first currency is called the base currency and the second currency is called the counter, or quote currency (base/quote). For example, if it took $1.07500 to buy €1, the expression EUR/USD would equal 1.075/1. The EUR (euro) would be the base currency and the USD (dollar) would be the quote, or the counter currency.

So that is the straightforward, universal, method used to quote currencies in the marketplace, now let's look at how the spread is calculated. Forex quotes are always provided with "bid and ask" prices, or "buy and sell" this is similar to what many investors will be familiar with if they have ever bought or sold equities; there is a different price to sell a share and there is a difference price to buy a share. Generally this small spread is the broker's profit on the transaction, or the commission.

The bid represents the price at which the broker is willing to buy the base currency (the euro in our example) in exchange for the counter currency the dollar. Conversely, the ask price is the price at which the broker is willing to sell the base currency in exchange for the counter currency. Forex prices are generally quoted using five numbers. So, for example, let's say we had a EUR/USD bid price of 1.07321 and ask price of 1.07335, the spread would be 1.4.

Fixed spreads versus true market pricing.

Now we have explained what spreads are and how they are calculated, it is important to stress the critical difference between the standard market maker broker with their advertised fixed spreads, and how an ECN - STP broker (such as FXCC) operates, whilst offering access to the true market spreads. And how a broker operating an ECN - STP model is the right choice (arguably the only choice) for traders who consider themselves professionals.

Many traditional market maker forex brokers will advertise what they term their "low, fixed, forex spreads", as being an advantage to forex traders. However, the reality is that fixed spreads cannot offer a significant advantage and in many instances may be misleading, given that market makers (by definition) make their own market and a market within a sector in order to benefit their own profitability.

Market makers may employ tactics such as widening the spreads; a tactic whereby forex brokers with dealing desks manipulate the spreads on offer to their clients when client trades move against the broker. The trader may place the trade at what they perceive to be a fixed one pip spread, however, that spread may be three pips away from the true market pricing, therefore the actual spread paid is (in reality) four pips. Comparing this to an ECN straight through processing model, where the trader's order is matched by the ECN participants, it becomes apparent how essential it is for retail traders, who want to be considered professionals, to place trades through an ECN environment.

FXCC's ECN/STP trading model never displays fixed spreads, the model offers up bid-ask quotes aggregated by a liquidity pool of constituents; predominantly the leading fx liquidity providers. Therefore the spread on offer will always accurately reflect the true buying and selling rates for a particular currency pair, ensuring that investors are trading forex under real forex market conditions of genuine supply and demand parameters.

A fixed spread may seem like a good thing when market conditions are optimal and there is heavy supply and demand. The fact is, a fixed spread remains in place even when market conditions are not the best and regardless of what the true buying and selling rates for any given currency pair are.

Our ECN/STP model provides our clients with direct access to the other Forex market participants (retail and institutional). We do not compete with our clients, or even trade against them. This grants our clients more advantages over dealing desk market makers:

Very tight spreads Better forex rates No conflict of interest between FXCC and its clients No limits on Scalping No “stop-loss hunting”

FXCC strives to offer its clients the most competitive rates and spreads in the market. This is the reason we have invested in establishing relationships with reliable liquidity providers. The advantage our clients have is that they enter the forex arena on the same terms as the largest financial institutions.

Prices are streamed from various liquidity providers to FXCC’s Aggregation Engine which then selects the best BID and ASK prices from the streamed prices and posts the selected best BID/ASK prices to our clients, as illustrated in the flow diagram below.

RISK WARNING: Trading in Forex and Contracts for Difference (CFDs), which are leveraged products, is highly speculative and involves substantial risk of loss. It is possible to lose all the initial capital invested. Therefore, Forex and CFDs may not be suitable for all investors. Only invest with money you can afford to lose. So please ensure that you fully understand the risks involved. Seek independent advice if necessary.

RISK WARNING: Trading in Forex and Contracts for Difference (CFDs), which are leveraged products, is highly speculative and involves substantial risk of loss. It is possible to lose all the initial capital invested. Therefore, Forex and CFDs may not be suitable for all investors. Only invest with money you can afford to lose. So please ensure that you fully understand the risks involved. Seek independent advice if necessary.

FXCC does not provide services for United States residents and/or citizens.

FX Central Clearing Ltd is authorised and regulated by the Cyprus Securities and Exchange Commission (CySEC), under CIF Licence Number 121/10 and operates under the EU Markets in Financial Instruments Directive (MiFID). FX Central Clearing is on the FSA(UK) Register (Reference Number 549790) and EEA Authorised.