In Forex trading, the price of a currency is always quoted in pairs. These quotes are presented to the traders as BID and ASK prices. The difference between the Bid and Ask is called the Spread which is the fee that your broker charges for every transaction that you make. Therefore, it is necessary to choose a Forex broker that provides the lowest spread for your trades. In this way, you’d reduce the costs of trading and at the same time maximize your chances of earning more profits.
Every Forex broker has their own policies regarding the amount and the type of spread they offer (Fixed or Floating). There are Forex brokers that offer spreads as low as 1 or even 0 pip, either in Fixed or Floating spread accounts. Trading with low spread Forex brokers will benefit you especially if you trade with short term strategies such as the Scalping method. Learn more about the advantage of trading with low spread.
On this page, you can find the best low spread Forex brokers for cost-effective trading in the Forex market.
It is important to go with the right forex broker to have all the benefits and receive the most affordable prices in the market because every little bit helps. That is why Forex brokers that provide low spreads should be among your top choices.
The most significant benefits of trading with low spread Forex brokers are as follows:
1. Minimizing Costs
In Forex, traders aim to make as much profit as possible, secure their personal funds, and keep the costs of trading to a minimum. This can be achieved if they go into business with low spread forex brokers. This way, they will focus on earning profits without having to worry about high additional costs.
Trading with such brokers is beneficial especially in highly volatile trading situations where a currency pair might move from 60 to 100 pips during a day. For instance, if the price of EUR/USD would go up 60 pips where you paid a wide spread of 6 pips, then you’d make a profit equal to 60 - 6 = 54 pips. Now, If you were to trade with a forex broker that offered lower spreads, say 2 pips, then you’d be able to gain even more profits given the 4-pip-drop in your transaction cost (60 - 2 = 58).
2. Opening Many Positions Simultaneously
Different traders have different styles. Some traders like to formulate one long and detailed strategy with a wider set of stops for one trading position, while others like to move fast with multiple positions and at smaller stop ranges. If you prefer the latter, then you definitely need to work with low spread Forex brokers.
Working with low spread Forex brokers allows you to open multiple trading positions simultaneously because you don’t have to worry about the high transaction cost for each position. This way, traders can satisfy their curiosity and experiment on many different strategies at the same time to figure out which strategy fits their day to day trade better.
Say that you want to open 3 different positions in a trade with a 6-pip spread, in this case, your total cost of trading will be 6 x 3 = 18 pips. If you manage to make 50 pips worth of profits in one position, then your total profits will be 3 x 50 = 150 - 18 = 132 pips.
Now if you had the same set of trading conditions with a low spread forex broker that offered a 2-pip spread, it would have saved you 12 pips (150 - 6 = 144).
3. The Right Forex Broker for Scalping Technique
Many forex traders are prone to the scalping technique to make more profits without spending so much time. Again, this will be much simpler if you go with a low spread forex broker since low costs leave more room for more profits. Check out the list of the best forex brokers for scalping.
In scalping, the traders focus on small profits acquired from many trading positions. These traders work with multiple positions in a day, and they cannot afford to have too much operation cost deducted from their small profits. Therefore, it is imperative for scalpers to look for forex brokers that offer the lowest spread possible in order to maintain their profits.