the leading fx liquidity providers. . So, for example, let's say we had a EUR/USD bid price.07321 and ask price.07335, the spread would.4. The trader may place the trade at what they perceive to be a fixed one pip spread, however, that spread may be three pips away from the true market pricing, therefore the actual spread paid is (in reality) four pips. Comparing this to an ECN straight through processing model, where the trader's order is matched by the ECN participants, it becomes apparent how essential it is for retail traders, who want to be considered professionals, to place trades through an ECN environment. This is the reason we have invested in establishing relationships with reliable liquidity providers.
Please read the full. Generally this small spread is the broker's profit on the transaction, or the commission. The bid represents the price at which the broker is willing to buy the base currency (the euro in our example) in exchange for the counter currency the dollar. Many traditional market maker forex brokers will advertise what they term their "low, fixed, forex spreads as being an advantage to forex traders. A lower spread naturally ensures that successful trades will move into profitable territory earlier. Market makers may employ tactics such as widening the spreads; a tactic whereby forex brokers with dealing desks manipulate the spreads on offer to their clients when client trades move against the broker. 71.05 of retail investor accounts lose money when trading CFDs with HF Markets (Europe) Ltd. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. This is perhaps the simplest example of a forex spread that we see in our daily lives. Fixed spreads versus true market pricing. Before any trade actually becomes profitable, forex traders must first account for the cost of the spread, automatically deducted by the broker. It can also be regarded as one of the costs of doing business when trading.
However, the reality is that fixed spreads cannot offer a significant advantage and in many instances may be misleading, given that market makers (by definition) make their own market and a market within a sector in order to benefit their own profitability. The spread in the forex markets can be described as the difference between the various buying and selling prices on offer for any particular currency pair.