Short Term Trading forex trading links forex trading books market statistics trader values euro and us dollar Shocks Crashing The Benefits of Tight Spread FX Trading

Tuesday, 4 September 2012

The Benefits of Tight Spread FX Trading

What are the advantages to low spreads and how do you find them?
One of the key skills to Forex trading is knowing exactly when to trade. There are a great many factors that decide whether it’s a good time to be trading or not, and correct timing can be an excellent way maximize profits. You might know the basics – avoid the European-Asian overlap, and get in the power hours if you can, but have you considered your broker? A great time to trade is whenever your broker is offering low spreads. Low spreads mean better profits, and this can be just as important as the time of day you trade.

Value for Money
A tight spread essentially means that your forex broker is charging less for the services they offer. They don’t charge you a fee as such, but the more pips they add between the sell and buy price, the more they make from your trades. There are all sorts of reasons a broker might be offering this, and if you can take advantage then go for it. If the spread is tight, it means that your trades will become profitable earlier, which is a great advantage.
Shop Around
Make sure you’re getting the best price you can. Just because one FX broker is offering one spread doesn’t mean it will be the same across the board, it can fluctuate wildly. If you’re looking at a particular pair, it makes sense to check that you’re using the best broker to maximise your profits. Spread can change all the time, so don’t just assume you’re getting a good deal. There are of course plenty of comparison sites available to help you make an informed decision.
Do Your Research
Attention grabbing spreads are everywhere, but it’s vital you do your research. A broker might advertise a great minimum spread, but that might not be what you get. That’s why finding out what typical spreads are can be more important. CMC Markets for instance, display the previous week’s typical spreads for popular FX pairs. This makes it far easier to find out if you’re getting a good deal. Take a look at their spreads at CMC Markets.
Advertised spreads are generally the very best a broker offers – and these spreads may only be available to the biggest and more comprehensive accounts, so it’s a good idea to check what spreads you might be offered, and if they’re negotiable. Your trading platform will show you exactly what you’re getting. Don’t assume fixed spreads are better either.
Boost Your Profits
Remember, choosing tight spreads won’t make or break your trade, and they shouldn’t be the sole reason for choosing a particular broker – they should be a bonus. Like every other factor in FX trading, or even CFD trading, you must strike a balance, but anything that might help boost your profits is certainly something to keep in mind.
The data contained herein is believed to be drawn from reliable sources but cannot be guaranteed, neither the information presented nor any opinion expressed constitute a solicitation of the purchase or sale of any forex, futures or commodity product. Those individuals acting on this information are responsible for their own actions. Forex, futures and commodity trading may not be suitable for all recipients of this report. The risk of loss in trading forex, futures and options can be substantial. Each investor must consider whether this is a suitable investment. All recommendations are subject to change at any time. Past performance is not a guarantee of future results. Please Note: All performance figures and illustrations were obtained using historical back testing on a computer and are not the results of an actual account. No guarantee is inferred that future performance will be like the results shown. Futures, forex and options trading involve risk. There is a risk of loss in futures, forex and options trading.

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