Forex Brokers with Fixed Spreads
Compare Forex brokers and accounts with fixed spreads, whatever the market conditions. Make the most of market volatility.
As a trader, you can choose between brokers with fixed and variable spreads. This article discusses the pros and cons of trading Forex on fixed spreads.
Fixed vs. variable spreads
The spread is the difference between the buy and the sell price of a currency pair at a point in time. If your broker quotes EUR/USD at 1.5602/05, this translates into a 3 pip spread.
- If your broker quotes fixed spreads, the difference between the buy and sell prices of each currency pair should be the same at all times, whatever the market conditions. Fixed EUR/USD spreads usually range between 2 to 3 pips depending on the broker but are as low as 0 pips with an IronFX Zero Fixed Vantage Account (IronFX.com).
- If your broker quotes floating spreads, you'll face wider spreads during volatile market conditions and tight spreads the rest of the time. EUR/USD spreads typically vary between 1 and 4 pips under normal market conditions. However, they have been known to widen up to 8 pips and beyond under extreme market conditions.
Advantages of fixed spreads
News events, data releases or the start of a new trading session can move the markets in a big way. This creates opportunities to profit from price jumps. However, it can also catch you off guard as spreads often widen substantially around those times.
A broker with fixed spreads will shield you from wild swings in spreads. This will work in your favour if you plan to trade around news events, data releases or simply day trade. If you're new to Forex trading, you'll find that fixed spreads provide a more predictable trading environment and help mitigate risks as you learn the ropes.
Disadvantages of fixed spreads
However, fixed spreads mean you're likely to pay wider spreads under normal market conditions. In other words, you'll pay for certainty of pricing during volatile market conditions in the form of marginally wider spreads at all other times.
For example, you could pay between anywhere between 1 and 2 pips for EUR/STP with an STP broker on variable spreads. And if you can afford to invest a large deposit upfront, you could trade EUR/USD from 0 pips with an ECN broker on a commission basis
In short, fixed spreads provide a more predicatble trading environment albeit at a premium. This could work for you if you plan to trade in volatile market conditions or value piece of mind of you learn the basics of Forex trading.