In the world of Forex trading, a spread, or a bid-ask spread, is the difference between the ask price that a dealer sells a currency for and the best possible bid price that the dealer pays for that currency.
In their guide, Traders Union experts told how to find the lowest spread Forex broker and made a rating of such companies. The list contains brokers that are well-known for having low spreads, in addition to low minimum deposits and perfect conditions for trading. If you want to get access to the lowest Forex spreads available, check out the top online brokers on the Traders Union website.
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What are low spread brokers?
Low spread brokers are brokers that have particularly low costs and spreads when compared to other brokers in the Forex industry. Spreads are essentially how brokers earn money in Forex, so it can be difficult to find a broker with relatively affordable spreads. However, there are many different types of brokers in the list from Traders Union experts, many of which have very low spread costs for traders.
A low Forex spread means that there is a relatively little difference between the bid and the dealer’s ask price. It is always more preferable for traders to initiate a trade when spread costs are low, such as during major Forex sessions. Low spreads mean that the market is dealing with low volatility and the current liquidity rate is higher than usual.
In fact, different spreads can be considered low for different currency pairs. For example, EURUSD has an average spread from 0.1-0.8 pips, while for other pairs it is usually higher.
Average spread vs minimal spread
Actually, it is much more reasonable to pay attention to the average spread instead of the minimum spread, because the average spread is a lot more objective. The spread can fluctuate quite a bit during a session. However, while calculating commissions, the average spread is much more useful.
What else should be considered?
Brokers with the lowest spreads seem quite attractive. However, they are not perfect. In many cases, especially with online brokers, low spread brokers will charge an additional commission between $1.50 and $4.50 per lot. This should be considered before opting for a low spread broker.
What does Forex spread depend on?
There are quite a few different factors that determine what a Forex spread will depend on. Forex quotes must be conferred with ask and bid prices. The bid will represent the price at which the market maker or broker wants to buy the currency. For this example, you would like to sell USD. The broker will want to buy this currency in exchange for a counter-currency like GBP. The ask price would be the price for which the Forex broker will sell that base currency in exchange for the second currency.
A bid-ask spread is actually the difference between the purchase price that a broker will buy and sell a specific currency. If a trader initiates their sell trade with a broker, their bid price would be considered quoted. If you want to initiate your buy trade, the ask price would be what is quoted.
In their article Traders Union experts shared also information about how to get the lowest spread in Forex. Moreover, on the Traders Union website you can find a list of the lowest spread Forex brokers and frequently asked questions about Forex trading and spreads. TU experts constantly analyze the Forex market and publish only the latest news. On the website there are also reviews about various Forex brokers.