Broker to Trading

The bid/ask spread is a feature which may be looked at when choosing a provider to trade with. The headline spread figure tends to be for more liquid Forex pairs. This page focuses on CFD providers which offer spreads from zero.

In general providers with zero spreads offer spreads from 0, which is to say variable spreads, though some may more rarely offer fixed spreads of 0.

The Forex market is large and liquid, and may offer very low spreads. In some cases these spreads can reach a low of 0 pips, which is to say the cost of trade will be factors other than the spread. This can be significant in techniques such as scalping or other short term trading.

However also in general such spreads have a commission charge added to them. This tends to be fixed (but may have variable elements) and can at some providers be relatively low. The spread plus any commission tends to be the main components of the cost of a trade.

The commission charge is normally quoted as either per side or round turn (or trip). The first, per side is a charge covering both the open and the close of the trade. Round trip or turn, as the name suggests, is a charge for the full trade (open and close).

As the spread charge is a charge for each side of the trade, it can be helpful to look at the commission charge per side when calculating cost elements of the trade. If the commission charge is quoted round trip, then per side is half the round trip.

While the commission charge can be fixed, the spread, as noted is normally (but not always) variable (if there is a commission charge). This means that while it may go as low as 0, it can be higher as well. However one way to gain extra insight on this figure, is to look at average spreads. If these are also very low, then the trader can be more confident that the spread might be near zero, at least.

This said even average spreads can have a range to them which may be higher than the average itself. And what might produce higher variable spreads - well this depends potentially on a lot of factors, one of which is the volatility of the market. The more volatile a market, the greater is the tendency for the spread to range upwards, though this is not necessarily a linear outcome. In very volatile market conditions, for example news trading, significantly higher spreads can be seen. This said, some providers may offer a limit on how high the spread ranges.

Since spreads are related to market liquidity, what does this mean for the trader ? It means that highly liquid pairs will tend to offer lower spreads. The highly liquid pairs are defined in a sense, as the major pairs, particularly EUR/USD. In fact the headline 0 spread can be seen normally for EUR/USD and perhaps other pairs, depending on the provider.

EUR/USD is at the forefront of many currency exchanges as well as a driver of money flow and a target for traders and banks themselves exchanging currencies (core engines of the Forex market). These factors can also make it volatile at times, and prone to reactions from news events. In fact, EUR/USD is a popular focus for news traders, particularly as it is involved in many key economic decisions made in both the EU and the United States.

Traders may be interested in other pairs, so it can be helpful to check the spreads for different pairs as well. If traders are interested in looking at the relation of liquidity to spreads, then they may examine the difference between spreads for the majors pairs and those for the minors and particularly the exotic crosses (which tend to be less liquid).

With a low average spread from zero, and a tight commission charge, then spreads plus commission can be seen below 1 pip for liquid markets and maybe lower then 0.5 pips. This said, fixed spreads which do not normally have a commission charge (but there are exceptions), have got tighter over the years, and spreads below 1 pip can be seen. However variable spreads may be a better choice if the trader needs their trade to go through as such spreads, in a sense, can adapt to different market conditions.

So do zero spreads help traders ? They can be helpful in pointing to characteristics of a market to be traded, whether it is liquid and when it is volatile (though volatility can more typically be gauged by other chart based means, including indicators, charting patterns and charting types such as candlestick charts). For those who use strategies dependant on short term trading, then they may point to how feasible such techniques are with a particular pair.

This said, the more liquid a pair the more it can be volatile. It is the case than less liquid pairs can be very volatile as well, due in fact to the very lack of liquidity, but liquid pairs may evidence a more sustained type of volatility, such as can be seen around news trades, which is both relatively smoother and complex. This volatility can make trading difficult, reaching an extreme example with news trades at the moment of release (potentially). More sedate strategies may appreciate different types of spreads such as fixed spreads or may not be too concerned about how tight a spreads is (for example longer term trades).

But if the trader wants spreads from zero, then a selection of CFD providers is offered here, with varying characteristics, offering Forex spreads from 0, low commissions and low average spreads as well as accounts suited to higher frequency trading (and lower). Please note specifications are subject to change.