What You Should Know About a Spread in Forex Trading

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There is two value for one currency price: ‘bid,’ and the other is ‘ask.’ The ‘ask’ price is for the currency’s purchase price. So, you need to pay the asking price to buy the currency. In the same way, the ‘dib’ is the selling price of the currency for you.

You will get the money in ‘dib’ amount of money.

There is a difference between the ‘ask’ and ‘dib’ price, and always the ‘ask’ price is greater than ‘dib.’ The difference is the commission for the broker agent. Any broker with ‘no commission’ or ‘zero

Commission’ is not really without a commission fee. For the service of the best forex trading brokers need to get money.

From a trading point of view, the ‘spread’ is the commission fee for you to pay for your forex agent.

So, agents do not need to charge an extra fee to trade with you. Well, before you look for “best forex robots comparison,” let’s know more about a spread in forex trading.

How to Calculate ‘Spread’ to Trade in Forex

The smallest part of the currency pair is four decimal places for USD/EUR. This smallest unit is known as ‘pip.’ So, the spread can measure or calculate in pips. Mostly, the currency pair, one pip equal 0.0001. For example, three pips spread for USD/EUR would be 2.1051/2.1054.

Different currency pairs have different pip, like the yen (Japanese) and USD pair measured in two decimal places. For example, one pip of JPY/USD would be 220.00/220.01.

Kind of ‘Spread’ to Trade in Forex

Different sort of ‘Spread’ to trade in Forex depends on broker agent. Based on the method and strategy of the broker, two kinds of spreads are:

  • Variable or Floating
  • Fixed

A Brief on Fixed Spread to Trade in Forex

Now let’s talk about the details on the Forex fixed spread. Mainly, fixed spreads remain the same nevertheless of the market situation at the given time. The market condition is unstable, and it remains the same.

Mostly, the brokers offer the fixed spread that works as a dealing desk or market maker model. Then the brokers buy large places from the liquidity providers by using the dealing desk.

Then offer those places in a smaller portion to traders. That means the brokers act as the second party to the trade’s clients.

Discussion on Variable Spreads to Trade in Forex

From the above, you already know the fixed spread trade in Forex. Now we will talk about the variable spreads. Usually, the variable spreads change frequently.

Even the variance between currency pairs ask prices and bid are also changing constantly. Firstly, variable spreads offer without dealing with desk agents.

Moreover, the desk (non-dealing) brokers get the currency pair price from many liquidities dealers and pass the prices for different traders without any dealing desk intrusion. That indicates the provider has no right to control the spread.

Which one is better: Variable Spread vs. Fixed

We often get a common question from the people that which one will be better for them between variable and fixed. Firstly, we will tell you that it relies on traders.

However, if the traders have a small amount and get less benefit, they can go for the fixed spread. On the other hand, if the traders want fast execution and want to skip requites, then variable spreads will be right for you.

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