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.
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.
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