Make highest profit when trade with the lowest spread forex brokers
Have you ever heard about spread or the lowest spread forex brokers? The term “spread” is rather hard to understand for beginners. To have a thorough knowledge of this term in forex trading, I will share you all information I know.
Basically, spread is the difference between the Bid and the Ask prices. In other words, this is the transaction fee you have to pay for best forex brokers or banks when you trade with.
The higher the spread, the higher the transaction cost. No-one wants to pay for brokers with high fee. They just want to trade with the lowest spread brokers to have better benefits. But everything can change when some traders don’t want to trade with the lowest spread brokers.
1. How to choose the best low spread brokers?
I will show up some important conditions for you to choose the best low spread brokers:
- Regulated brokers: If brokers were regulated in your country, don’t hesitate to choose and trade with them. If there are not any brokers being regulated in your country, choose the reliable and lowest spread broker. More information of Exness regulation
- Local payment system: Some low spread brokers don’t have local payment system. Traders only can deposit and withdrawal by Visa, Credit card... so you shouldn’t trade with them. The fee for international transaction is too high, even up to 2 - 4 % of your total deposit amount.
- They have local support or native languages. If you have any questions and need immediate help, just contact brokers. If they are willing to help you early, they can be reliable and maybe the lowest spread brokers.
- And some conditions are for you to think of: trading forex license, available service, their credibility.
- Other trading conditions: margin leverage, commission/fees/deposit, bonus or rebate. See more about Exness leverage here
In short, I will list the 5 top lowest spread brokers for you to refer:
2. Do you have any ideas of the differences between Spread and Commission?
In forex world, it’s categorized 3 types of forex brokers. They are market makers, STP, and ECN. For market makers and STP, their main income is earned from spreads, so they have to focus on this spread to have a lot of money. And it’s easy to understand when their spreads are a lot higher than those of ECN brokers.
When they get quotes from liquidity providers, they will have to change the transaction fee (spread) to those quotes. For ECN brokers, they will provide the exact quotes that liquidity providers provided. Therefore, they have to change commission to make the price difference as their main income.
If you pay more attentions, you will see the differences.
- Main income of Market Maker and STP brokers are from spreads.
- Main income of ECN brokers are from commissions.
For ECN brokers, you were charged commission and spread, but those spreads are nearly zero. Why? Because their main fee you have to pay is the commission.
In a short, I will list the 5 top lowest spread brokers for you to refer:
3. Which traders need low spread brokers?
To begin with, I want to tell you about 2 kinds of traders: scalpers and long term investors. And of course, there is an obvious difference between them.
Scalpers have a tendency to open and close several positions within just a short time. And the time to define their kind of traders is less than 30 days. Their main transaction cost is spread and commission. Moreover, they also earn just some pips per order, so they prefer to choose low spread and low commission brokers.
Vice versa, long term investors will keep their positions more than one month as their name “long term”.
For long term investors, they hardly pay attention to their spread and commission. Because they earn some hundreds of pips per position. They only pay a maximum of 2% of their profit for spread, but their main transaction cost is swap. Sometimes, they have to pay more than 90% of their profit for swap. For this type of traders, they prefer low swap brokers.
So what type of traders would you like to become?
If you are a long term investor, don’t care about spread.
If you are a scalper, spread and commission are important things to stress on.
4. Why US and UK brokers’ spreads are higher?
As you know, US and UK are the 2 biggest forex markets in the world, but their brokers’ transaction cost is less competitive than any other markets. To find out the reason, I conducted a survey of hundreds of top forex brokers in the world, and I found some helpful information that US and UK brokers usually provide higher spreads and commission than those in Australia and CySEC brokers. While CySEC brokers offer the lowest spreads.
Here are the spreads for EUR/USD of top forex brokers:
0.7 Pip (Classic account)
1.1 Pip (Premium account)
1.1 Pip (Standard account)
1.7 Pips (Zero account)
1.7 Pips (Standard account)
From this table, you can realize that CySEC broker and Exness have the lowest spread. UK and US brokers have the highest spreads. Their spreads double that of Exness.
US and UK brokers have disadvantages of their regulations. Their regulations don’t permit them offer high leverage or bonuses, and they have to pay more for the regulation fee. That’s why they have to charge more spread and commission. My below-mentioned conclusion will help you choose the most suitable brokers. Here you are:
If you are an ASIAN trader, Exness is the best brokers for Scalpers.
If you are an Africa trader, XM and FxPro are the best.
If you are a US trader, Forex.com is the best.
If you are a European trader, XM, FxPro and Exness are the best.
Click here to know more about Best forex brokers.
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