What Is Spread? What Is Fixed Spread?
Forex spread is charged with each trader transaction regardless of its result and is a form of payment of brokerage services in the financial market. This is net income of broker. Thus, mathematically, the spread is the difference between the most favorable purchase prices and selling of the same financial instrument. Thus, the spread for each symbol in each time should be changed depending on the current market price. Broker can to fix spread over a certain period of time at the same level, making it artificially.
What of these species of Forex spread more profitable for traders? Using a known low and spread, the trader gets the advantage and increases the efficiency of its activities on the market. In the case of the widening gap between the best prices Bid and Ask, the size of the fixed spread may also be increased, that is, recorded on the new mark. On the other hand, uncontrolled floating spread at different times may potentially be provided both below and above the fixed spread significantly. This introduces an additional element of tension in the work of the trader.
Fixed Forex spread by itself is not a reason to abandon the trade costs and profit planning. However, before you use such proposal from broker, make sure that: minimum spreads from 0.2, 0.5 offers not all currency pairs, but only on the most liquid of them; fixed spreads are available only for transactions processed by the dealer; the company does not give an absolute guarantee of constant maintenance of a fixed spread at the same level, and clearly inform customers about the possibilities and conditions to change it.
As you can see, the type of spread does not guarantee the reliability of the broker. Fixed and floating spreads have certain advantages and disadvantages. However, a careful study of companies offers to help you optimize the cost of each transaction, and enhance the overall security level of your work in the market.