Fixed spreads allow you to trade knowing the costs of your investments at all times. Our experts have made a selection of the best online brokers with fixed spreads. A comprehensive list to help you choose the broker that is right for you.
Brokers with Fixed Spreads
What are fixed spreads?
The spread is a basic concept for those who trade currency pairs, although it applies to any financial instrument (currencies, precious metals, commodities, stocks or indices). It is the difference between the buying price (Bid) and the selling price (Ask). When we talk about fixed spreads, therefore, it means that the difference between Bid and Ask is always fixed. In other words, if the broker says that the spread for trading the EUR/USD pair is 3 pips (the pip is the smallest price movement that the pair being traded can make), it will always be 3 pips.
Fixed spreads are usually set between 2 and 3 pips. Variable spreads usually range from 1 to 4 pips, although spreads of 8 pips have been found in very extreme market conditions.
If your broker quotes floating or variable spreads, you will face wider spreads during volatile market conditions and narrow 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 as much as 8 pips and beyond under extreme market conditions.
It is up to each broker to decide whether to use fixed or variable spreads, however, as a general rule, Market Maker brokers (their clients’ trades are not carried out in the market, but on the broker’s own trading desk) tend to use fixed spreads; and ECN brokers (who place shares directly in the market) prefer to use variable spreads.
When is it best to use fixed spreads?
- When trading in the short to medium term: because the cost of trading will be known in advance.
- When the market has high volatility and low liquidity: volatility tends to trigger spreads, therefore, in markets with these characteristics, Forex brokers with fixed spreads are best.
When is it best to use variable spreads?
- When the market is calm: the opposite (logically) of the above. If the market is quiet, brokers with variable spreads will offer better spreads.
In a nutshell
Traders who are just starting out usually choose brokers with fixed spreads. In this way, they know in advance the cost of entering the market, so it is a way of having more control over a business that is still somewhat unfamiliar to them. More professional traders, on the other hand, choose variable spreads, as they are looking to enter the market at calm times.
One thing you should always bear in mind when contracting a Forex broker is to read the fine print, as in some cases they reserve the possibility of changing the spread mode depending on market conditions.
- Social Trading
- Scalping Trading
- Hedging Trading
- Negative Balance Protection
- Demo trading accounts
- Variable spreads