Niceville premkumar
22-08-16 0 Hits


Spread: The spread is the difference in pips between the bid and the ask price of any currency pair your forex broker offers. You buy at the ask and you sell at the bid. This difference between the bid and the ask price is how forex brokers make their profit. The narrower the spread is the less you are paying for the trade. A narrow spread is mostly important for a forex trader who executes many trades in a short period of time with smaller profit objectives. On the other hand, traders using a forex trading system that aims at catching medium to long term market swings are affected less by the spread of the currency pair they are trading. Personally, I will not pay more than 3 pips on EUR/USD, GBP/USD, USD/CHF and USD/JPY (the most liquid pairs). For the EUR/USD there is no need to pay more than 2 pips in today's competitive market. Spread Guarantee: This is a very important issue that can affect very much your trading. When you approach a forex broker you will be quoted a spread for the currency pairs that you can trade with that forex broker. What is important is not the spread that the broker quotes but how stable is that spread. Many brokers will widen the spread at times and that is ok. No way around that. The question is how often. It is perfectly understandable that during extreme market conditions such is following news events your broker will widen the spread of the pair you are trading. However, the question is by how much. Some brokers will make a great effort to keep it as narrow as possible and those are the ones you should aim to trade with. Another example of spread increase is during very low liquidity periods such as parts of the Asian trading session. 

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