What Is Forex Spread
What Is Forex Spread
The spread is the difference between the buy (also called bid) price and the sell (also called ask) price. Two prices are given for a currency pair. The spread represents the difference between what the market maker gives to buy from a trader, and what the market maker takes to sell to a trader.
If a trader buys any currency and immediately sells it – and no change in the exchange rate has happened – the trader will lose money. The reason for this is that the bid price is always lower than the ask price.
For example, the EUR/USD bid/ask currency rates at your bank may be 1.2015/1.3015. This represents a spread of 1000 pips. This spread is very high compared to the bid/ask currency rates for online Forex investors, such as 1.2015/1.2020 – a spread of 5 pips. In general, smaller spreads are better for Forex Traders.
Forex Tight Spreads
A tight spread occurs when there is only a small difference between the price at which you can buy a market and the price at which you can sell that market. Also known as a ‘narrow’ spread, this means that a trader’s cost of trading that market will be relatively low (unless there are other charges).
Forex Brokers provide tight forex spreads on major currency pairs like EUR/USD, GBP/USD and JPY/USD . This means that you can trade these markets with peace of mind that you are trading in the same tight spread regardless of how volatile the underlying market spreads are. For example, during the announcement of major news or economic data, underlying FX spreads may widen.
It is important to remember that spreads are variable meaning they will not always remain the same and will change sporadically. These changes are based off of liquidity, which may differ based off of market conditions and upcoming economic data. To reference current spread rates, always reference your trading platform.
So you must notice brokers forex tight spreads will widen during important forex news and you must be careful during volatility forex market and check the fx spreads before open trades.
Forex Spreads Comparison
forex brokers provide you different spreads on different currency pairs so for forex spreads comparison visit our homepage Forex Brokers List and choose your fx broker then compare it with other brokers spreads on major currencies.
What is Forex Slippage?
The difference between the expected opening price of a trade and the price at which the trade actually executes is called slippage. Slippage, also known as market gapping, often occurs during periods of higher volatility, when market orders are used, and also when large orders are executed when there may not be enough interest at the desired price level to maintain the expected price of trade.