The spread is the difference between the Bid and the Ask price of any given currency pair. The Ask is the price you would pay to buy and the Bid is the price at which you may sell a currency pair. Forex trading brokers rarely charge commissions, and as a market maker or provider will most likely make a portion of its revenue from the Bid/Ask spread. Several forex brokers offers 2 Pip fixed spreads on EUR/USD and USD/JPY, which, if you know anything about forex, are certainly two of the most popular currency pairs. Competitive spreads are an essential factor in choosing a broker and will lower your transaction costs per trade making it easier to open and close individual positions closer to your target price without all the additional costs.

Forex Facet strives to provide our customers with the most competitive brokers offering trading terms and the best forex trading environment they can offer. In fact, spreads affect the return on investment or (ROI) on your trading strategy in a big way. Your probably dont realize just how much. As a trader or investor, your of course always concerned about buying low and selling high. With a wider spread, your initially buying higher and selling much lower. a single half pip spread does not sound like much, but it can easily differentiate between a profitable forex trading strategy and one that is much less lucrative.

Obviously spreads differentiate from broker to broker and they are often not as transparent to you their customer, as you would hope. So comparing brokers by spread is very difficult, if not almost impossible. The offer of a fixed spread sounds tempting, but this is also a bit of a misnomer, as you will essentially pay more for a fixed spread throughout a regular trading day than if you had the variable spread built in. This is because your paying insurance against large spread that occur when the market is highly volatile.

Should I Choose a Fixed or Variable Spread?

The choice over a fixed or variable spread will highly depend on your trading patterns. If your one to trade when something triggers the market, like a news announcement, then you will most likely be in a better trading situation of your spread does not widen during that volatile time. Of course execution is very important, cause if you cant get your trade in during a volatile market, then what is the point anyway?