Anyone else wants to trade with lowest spread brokers to earn more money?
Many people who are trading forex are interested in spread forex brokers. The frequently asked questions must be “Who are lowest spread brokers?” This article will help you to have a deep understanding of every aspect of low spread brokers.
First, we need to know about the definition of spread. Basically, the term “spread” mentions to the difference between the Bid and the Ask prices. It is the fee of transaction you have to pay for brokers or banks. The higher the spread, the higher the transaction cost. From this reason, most of the traders want to trade with low spread brokers and best forex brokers. However, not all traders want to trade with lowest spread brokers. This article will cover a lot of information for you.
1. What kind of traders need low spread brokers?
In forex trading market, there are 2 types of traders: scalpers and long term investors. When talking about scalpers, they often open and close several positions within short time.
The duration to keep their position open takes place about less than 1 month, so their main transaction cost is spread and commission. Moreover, they also earn just some pips per order, so they prefer to choose low spread and low commission brokers.
On contrary, traders who keep their positions open longer than 1 month are long term investors. Because they keep their positions longer, they earn some hundreds of pips per order.
In fact, they don’t pay much attention to their spread and commission, because they only pay a maximum of 2% of their profit for spread, but their main transaction cost is swap, because they keep their positions open for several months. Sometimes, they have to pay up to 90% of their profit for swap. For this kind of traders, they prefer low swap brokers than any others.
From this analytics, you can decide on what type of trader you are.
If you are a scalper, spread and commission are 2 important elements to care about.
If you are a long term investor, don’t pay attention to spread.
2. So, what are the differences between Spread and Commission?
In forex market, there are 3 types of forex brokers: Market Maker, STP, and ECN. For Market Maker and STP, their main income is from spread. Because they live on spread, so their spreads are a lot higher than those of ECN brokers.
When they get quotes from liquidity providers, they will add the transaction fee (spread) to those quotes. For ECN brokers, they will provide the exact quotes that liquidity providers provided. Therefore, they have to charge commission as it is their main income.
And we see the differences here:
- Main income of Market Maker and STP brokers are spreads.
- Main income of ECN brokers are commission. For ECN accounts, you were charged commission and spread also, but those spreads are very small, even nothing. The main fee you have to pay is commission.
In conclusion, I will list 5 lowest spread brokers for you to refer.
- Exness.com
- Hotforex.com
- FBS.com
- XM.com
- FxPro.com
3. How to choose the best low spread broker?
There have been a lot of low spread brokers, so how about your decision of brokers?
- Regulated brokers: If brokers were regulated in your country, don’t hesitate to choose and trade with them. If there are not any brokers being regulated in your country, choose the reliable and lowest spread broker. More information of Exness regulation.
- Local payment system: Some low spread brokers don’t have local payment system. Traders only can deposit and withdrawal by Visa, Credit card... so you shouldn’t trade with them. The fee for international transaction is too high, even up to 2 - 4 % of your total deposit amount.
- They have local support or native languages. If you have any questions and need any immediate help, just contact brokers. If they are willing to help you early, they can be reliable and maybe the lowest spread brokers.
- And some conditions are for you to think of: trading forex license, available service, their credibility.
- Other trading conditions: margin leverage, commission/fees/deposit, bonus or rebate. See more about Exness leverage here.
Depending on which region you are living, you can take a look at some suggestions as following:
- If you are an Africa trader, XM and FxPro are the best solution.
- If you are a US trader, Forex.com is the best choice.
- If you are a European trader, XM, FxPro and Exness are the best one.
4. Why US and UK brokers’ spreads are higher?
As you know, US and UK are 2 biggest forex trading markets in the world. However, but their brokers are less competitive in term of transaction cost. And the truth is US and UK brokers usually offer higher spreads and commission than Australia and CySEC brokers. CySEC brokers offer the lowest spreads. This result is based on my research of largest brokers all over the world.
Example:
Here are the spreads for EUR/USD of top forex brokers:
Broker Name
|
EUR/USD spread
|
Regulation
|
Exness
|
0.7 Pip (Classic account)
|
CySEC, FCA
|
Hotforex
|
1.1 Pip (Premium account)
|
Vincent
|
FBS
|
1.1 Pip (Standard account)
|
Belize
|
XM
|
1.7 Pips (Zero account)
|
FCA (UK)
|
FXTM
|
1.7 Pips (Standard account)
|
Belize
|
Forex.com
|
1.8 Pips
|
NFA (US)
|
FxPro
|
1.7 Pips
|
FCA (UK)
|
From this table, you can see that the CySEC broker and Exness have the lowest spread. UK and US brokers have the highest spreads. Their spreads double that of Exness.
US and UK brokers have higher spreads because of the disadvantages of their regulations. US and UK regulations don’t allow them offer high leverage or bonuses, and they have to pay more for the regulation fee. That’s why they have to charge more spread and commission.
Again, I want to share you this important for you to keep in your mind:
- If you are an ASIAN trader, Exness is the best brokers for Scalpers.
- If you are an Africa trader, XM and FxPro are the best solution.
- If you are a US trader, Forex.com is the best choice.
- If you are a European trader, XM, FxPro and Exness are the best one.
And here are top 5 lowest spread brokers:
- Exness.com
- Hotforex.com
- FBS.com
- XM.com
- FxPro.com
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