Low spread Forex broker – What is that?

By | May 22, 2017

What is a low spread Forex broker?

A low spread Forex broker is one who gives you the smallest difference price between the Bid and Ask price. The smaller the distance, you can buy lower, and sell higher, as compared to a broker that has a higher bid and ask price, Correct? The key benefit here is that the low spread allows you to reduce your trading costs by a significant portion (which I will show an example of below)

Here is a graphical visualization of a tighter (smaller) spread:

low spread Forex broker

Just how much extra will you spend with a wider spread?

Let’s do a comparison:

If we were to buy the currency at 1.12 (see graphic above), we would pay an additional 0.0001 (1 pip), over the lower buy price of 1.1199. And let’s also assume we trade 100 standard lots per month

So we would pay an additional 1pip*$10 (value per pip in each standard lot)* 100 lots = $1000

So we would incur an additional cost of $1,000 per month right? Nope, not quite. Remember we have to close our position too right?

And since the closing spread in our graphic is 0.5pips greater (1.11985 vs 1.1198).

So then we would incur a total of:

0.5pips*$10 (value per pip in 1 standard lot)*100 lots per month = $500.

$1,000+ $500= $1,500. We would incur an additional cost of 1,500 with a broker with a spread of 1.5pips wider

So our main objective here in trading is to give ourselves as much of an edge as possible, every edge there is, we will try to take it and use it to our advantage. This includes keeping our trading costs low. Because for beginner traders, $1,500 maybe the difference between profitability and a losing month.

A low spread forex broker is good for us right? Almost always. Sometimes, the depth of liquidity available at each level might not be as large on a low spread broker, so if you wanted to buy 100 standard lots at one go, you might not be able to get filled all one price (see graphic below). If you wanted to buy 50 standard lots at once on the low spread broker, you have no problem. But if you wanted to buy 100 lots, you might need to enter 50 at 1.119 and 50 lots at 1.12.

low spread Forex broker

But in general for beginners, you don’t have to worry about this because you won’t be trading very large standard lot sizes of 100lots (even I don’t), so you will definitely be able to take advantage of the low spread prices the low spread broker offers

So what is an example of a good low spread forex broker with good depth of liquidity of at least 50 lots?

For me, it is Tickmill. I have been trading with Tickmill since 2012, back when they were known as Armada Markets. Their lower spreads have certainly helped me saved thousands of dollars over the years.

 

You can view their live spreads here: They offer extremely low EURUSD spreads of 0.2 to 0.3pips during the European and New York sessions. Spreads on other currency pairs offered are also extremely competitive.

Abundance Trading Group has also worked with Tickmill to arrange lower commission rates for our readers. Our readers get 5% off commissions for life when they open a Tickmill account through our site HERE

If you like the idea of trading with Tickmill, open an account with them (with 5% off your commission rates for life) HERE

Here’s what to expect:

Once you click the link above, it will send you to Tickmill’s account opening page. Go ahead and open your account there. Select Seychelles as your regulator. Fill out your personal details, and when asked to enter IB number, enter IB80466563 . Then submit your proof of identity (scanned passport page) and proof of address (scanned utility bill) and wait 12-48 hours for your account to be opened. Once your account is opened, the 5% commission discount will automatically be applied to your account

If you would like to start off with a DEMO first, Tickmill offers this option as well. You can test drive a Tickmill demo HERE

What to expect for the Tickmill Demo:

When you click on the demo link above, you will be directed to Tickmill’s demo sign up page. Simply enter your name and email, and wait for Tickmill to email you your trading account logins (within a few minutes), and begin to start trading real prices!

With a Tickmill DEMO, you also have the chance to take part in Tickmill’s DEMO RACE. You can win up to $200 cash weekly by trading your demo account without risking real capital. This is an excellent way to start practicing your trading skills in my opinion.

low spread Forex broker low spread Forex broker

You can take part in the Tickmill DEMO race HERE

What to expect: Once you click the link, you will be directed to Tickmill’s FOREX DEMO RACE contest page. Just fill in your name, email and the which week of the demo race you want to join and you’re in!

I’ve enjoyed writing this article about what low spread brokers are and I hope I have truly added value to you!

 

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