Fixed spreads have smaller capital requirements, thus trading with variable spreads needs a lot of liquidity which many retail traders cannot afford. So, fixed spreads offer a viable and cheaper alternative. Better trade planning is execute by using fixed spreads while trading. This is because traders always have a clear plan of what they can expect to pay when they execute a trade.

The fixed spread is for you if you are a scalper. Scalping is nothing but getting small profits in several trades within a day. Scalpers will be better served using fixed spreads because the spread will impact any profits made.

What is Fixed Spread?

The trading cost is the key feature of all investors or traders, at the end of the day amount can be paid just for the difference between the buy and sell price. Typically, the trading costs charge by the broker are built into a difference between the price for a particular instrument or more known as the spread. Simply there are two different prices for currency pairs, they are bid and ask prices. The difference between these two prices is known as the spread. Spread is how brokers make their money without commission. Instead of charging separate fees for making trades, the cost is built into the buy and sell price of the Forex pair you want to trade.

What are the Different Types of Fixed Spread Traders?

Those who get in and out of the market very often, several times a day, and just take a few pips at a time generally prefer trading with fixed spread brokers. However, there is a thought that a broker offering wide fixed spreads may not be the best fit. Traders who trade according to the news can be benefit from using fixed spreads.

Even some traders have issues with spreads widening to as high as 50 pips during news trades with variable spread brokers, so you should close the fixed spreads brokers, they could prevent this. Those who use micro accounts can be better off with fixed spread brokers. You will not pay extra commission by using low-frequency trades. Unlike variable spread brokers who charge commission on each side of trades.

What are Fixed Spreads in Forex?

Fixed spreads remain the same irrespective of what market conditions are at play at any given time. Or else, conditions of slippage or high volatility do not affect a fixed spread. Fixed spreads are mostly used by brokers who offer the market maker business model.

By fixed spread, the brokers buy off large positions from the liquidity providers and offer positions in smaller chunks to traders using a dealing desk. So, the market maker performs as the counterparty to the trade. In this case, the broker is able to offer fixed spreads to its clients because they are able to control what is given to these traders using the dealing desk.

Fixed vs Variable Spreads

The answer to the question of which is a better option between fixed and variable spreads completely depends on the situation of each individual trader. There are some traders who get benefit from using fixed spreads when compared with variable spread brokers. Whereas, the reverse can also be true for other traders. Traders with micro accounts and fewer monthly trades will benefit from fixed spread pricing.

What are the Advantages of Fixed Spreads?

Fixed spreads are set by the brokers and they will not change regardless of market conditions or volatility. Fixed spreads are more transparent, in forex fixed spreads mean transparent costs. You know exactly what you are going to pay for each time you trade, regardless of interbank liquidity, time of day, or trading volumes.

You can greatly reduce the cost of trading by applying fixed spreads. They offer no surprises, ensuring you can budget the costs of transactions well in advance. Volatility in the Forex market has become commonplace and isn’t limit to news events. Unluckily variable spread accounts can make news trading very confusing because of how wide the bid and ask fluctuate.

Short term Forex trading strategies involve making numerous trades in a short span of time. It is much easier and more predictable using fixed spreads. Due to the nature of this strategy the potential gains can be small, so using fixed spreads ensures a higher level of price transparency.

What are All the Disadvantages of a Fixed Spread Broker?

Requotes are common with fixed spread arrangements since pricing is coming from one source. Pricing will occasionally change dramatically due to supply-demand dynamics. The broker is force to urge the trader to accept a new entry price offered for the trade. Because there is no flexibility for spread adjustment to account for these swings.

Slippage is yet another serious issue. The broker’s ability to give a fixed spread is hampered when prices are moving quickly. And the price fill may wind up being far worse than if a broaden variable spread was employed. You might not find the idea of trading with set spreads very appealing. Because it is only possible because the broker’s dealing desk controls the order flows and execution prices.

How to Measure Spread in Forex?

The spreads are measure by pips, which is the smallest unit of price movement of a traded asset. In currency pairs, one pip is equal to 0.0001. for an instance, 4 pip spread for EUR/GBP would be 1.2339/1.2335. whereas, in Japanese yen currency pairs are quote to only 2 decimal places.

Best Forex Brokers for Fixed Spreads

Here are some best Forex brokers for fixed spreads.

• Milliva

• IG

• Saxo Bank

• CMC Markets

• Interactive Brokers

• TD Ameritrade

• Forex.com

• XTB

• City Index

• eToro

Can I Trade Forex Without a Broker?

Forex trading is conduct from within a brokerage account, which offers you some degree of leverage, along with access to a trading platform and a range of currency pairs. So, you cannot trade Forex without the help of a broker. You should choose a reliable Forex broker who holds proper regulatory licenses to avoid scams.

A decentralized exchange is also not a good choice for forex for cryptocurrency users who want to trade with stablecoins. Even if zero spreads are promise, spreads can be much wider, and there is no method to guarantee optimal execution, which could lead to severe slippage.

Visit us on: www.milliva.com