Low Spread Forex Brokers

Lowest spread Forex Brokers - the perfect solution for scalping!

The spreads for different currency pairs vary depending on the jurisdiction in which the broker is based as the spread for one broker may be higher than for another. It is wise to look at the spreads for various currency pairs that you intend to trade other than EUR/USD which is the commonly traded pair and usually which brokers offer the lowest spread for. Deciding which forex broker to trade with can be a difficult task. Being able to find the right partner that will charge a fair price to give you access to the currency trading market, secure your investment throughout with appropriate dealings, and that will efficiently respond to your concerns isn’t simply more so when dealing with someone online and you never get to meet them “one-on-one” because they may be based abroad.

The major mistake most traders make when choosing a broker is to focus mainly on the cost factor. Many traders look for those that offer ‘the tightest’ spreads available or ‘near zero’ spreads on most major pairs. The reality on the ground is that brokers are aware of their cost structures and would never go into such business ventures. A broker’s main target is always to recover costs in any way possible, this means that for every subsidy of spreads they make, they are sure to recover and make up for it somewhere else in terms of other fees possibly, slippage and poor execution, or low-quality customer service and support.

Does the broker type favor low-spread offerings?

There exist two main types of forex brokers; ECN brokers and brokers that are market makers. An ECN broker runs the trader's orders directly to its liquidity providers to be executed at their prevailing spreads. These fluctuate over time according to supply and demand but are usually very minimal. Much as they offer lower spreads, the ECNs have various ways through which they recover their costs such as through transaction-based pricing and commissions. Depending on the trader’s style and level of activity, an ECN’s pricing structure may turn out to be lower as compared to the typical market maker broker overall.

Market makers on the other hand rely on the ”Bid/Ask” spread to make their income, this is multiplied if the trader chooses to use leverage in their trading strategy. A market maker acts as an intermediary between you, their client, bank, or liquidity providers, and prefers to “arbitrage” for profit the spread that they offer to you against what they can trade in the market on their behalf. The market maker keeps an instantaneous accounting of the “overs” and “shorts” for each currency pair daily. If he is losing at a certain point, he will slightly increase the spread to compensate for the difference over time. However, the market maker’s ultimate objective is to make a specified profit for each pair by the end of the business day.

What to be wary of when choosing a low-spread forex broker?

Businesses always compete in either providing low costs or offering quality services. A business cannot offer the most affordable services and not compromise on quality assurance. This means that when a forex broker offers the lowest spreads in the market, then it has to cut back on quality in some other department. It may happen to charge extra fees that will usually be hidden and not easily detected or it may indulge in bad business practices to hide its unscrupulous recovery of costs.

The trader must be concerned about how the broker will recover their costs whenever low spreads are offered. The quality of services offered and whether extra fees are being charged are evident if you do your due diligence review and compare the broker’s offers to the competitors’, going through customer testimonials and independent reviews of the broker. The difficulty is identifying a broker involved in bad business practices which are usually covered up leaving you at the mercy of your broker. The only sound course of action to take option you have in such a situation is to halt your business arrangement and withdraw your account balance without any delay.

Bad business practices usually reveal themselves in several ways. The first could be in constant re-quoting, you may see a quote and gain interest and act upon it with an execution order then get a server message with a different quote asking you to try again. This certainly means that the broker might have chosen to block your request for his profit reasons. However, if you took an unacceptably long period to act, then the broker may have acted appropriately to re-quote.

Slippage is also another common practice that could spoil one’s trading experience and lead to losing losses of capital. Slippage is caused by having your stated order executed at a price other than the one you stated. Your broker will defend himself by stating that the market is volatile or that you delayed to act or that some major data release caused an abrupt change in the market. If these indicators are not present and yet slippage occurs frequently then it means that it’s about time you questioned your choice of broker.

The last and probably, most frustrating bad business practice is spread manipulation. If your broker is a market maker, he can post whatever quotes are in his best interest then. Market makers are all about setting spread quotes, however, some unscrupulous ones may decide to quote rates that do not reflect anywhere in the market, they may for instance use quotes from an independent Reuter’s quote feed or even another broker. This type of spread manipulation is common when the market is in a tight range. Under such conditions, brokers can’t make profits so they manipulate the spreads. When traders place orders for the big move the quotes may take a plunge of roughly 20 to 30 pips. This is just the right amount to clear out any stop-loss orders and to prevent traders from benefiting from the move. The unscrupulous broker then cashes in on the profit from those closed client positions in this case.

The truth is that not all low-spread brokers are bad. However, you should be aware that a low-spread broker must make good of their loss one way or another. You may not need education materials or customer support and if at all you want a broker that truly focuses on a low spread and is ready to compromise in other areas. The most important thing is that the brokering firm adheres to good business practices in its execution of your orders.  A spread is very important in your choice of broker, but you must strive to understand what other costs might be hidden and if the quality of service might be low. The best advice to a trader is that they should take time to choose their broker wisely.

The Best Forex Brokers + Trading Platforms

There are several benefits for trading with lower spreads and the following are reasons for opening an account with a brokerage company that offers low spreads.

1. The trader gets to pay less per trade. Although it is not always as simple as it sounds, sometimes is.
2. If you are trading big, low-spread brokers levy a commission that becomes smaller the more you trade.
3. Trading with a broker offering low spreads encourages its competitors to reduce their spreads and this makes the forex market friendlier.

Some traders insist on the lowest spreads possible as a prerequisite before choosing to trade with any particular broker. It is important for traders who open and close several positions each session they trade to get the tightest spread possible so that they can be able to minimize losses. Some brokers provide either a low fixed or a variable spread with very attractive minimum and typical values. The downside to such low spreads is that the brokers may require high-deposit accounts. Some of the best international forex brokers offer pretty low spreads with mini or even micro Forex accounts but these are not to be confused with zero-spread accounts.

Low-spread forex brokers are preferred especially by traders who use the scalping strategy because this trading strategy allows them to open and close several deals per day and with low spreads, the commissions may add up to even 100 pips

To cut costs on forex operations, traders usually opt for dealing desks that can avail low spreads. For traders who use this criterion, financial losses are limited and this is what every trader looks forward to, being able to make profits and secure their principal invested amount.

Best Low Spread Forex Brokers

Forex.com

Are you new to the forex bandwagon and seeking a forex broker who will hold your hand as you start trading? This is one of the best brokerage firms for beginners as you can understand in Forex.com's detailed Review. It offers a myriad of education resources, reliable customer support, seminars, and multiple guides. Furthermore, it also offers 24/7 broker support for six days including Saturdays, and social trading features that are available in 25 languages.

PLUS 500

PLUS 500 is a highly acclaimed CFDs trader that specializes in such financial instruments as Forex, commodities, ETFs, and stocks. The firm also has one of the most competitive market capitalizations, currently valued at over $1 Billion, and operating through multiple subsidiaries across the world. Though the broker is registered and headquartered in London, it maintains an active office in Australia under the ASIC’s regulations.