Understanding spread

[shanmugapradeep]

Hello,

In a zero spread account, brokers charge a commission. For example, in ICMarkets, for 1 standard lot, they charge $7 as commission for EURUSD.

If I place a Buy/Sell trade with $1 lot on EURUSD, for a profit of 3 pips, it will be $30 - $7 = $23, and for a loss of 3 pips, it will be -$30 - $7 = -$37.

This is simple and easy.

With spread, brokers maintain a price difference between the Bid (Sell) and Ask (Buy) prices. So, if I place a Buy trade, it gets placed at the Ask price, and if I place a Sell trade, it gets placed at the Bid price.

Bid Price: 1.100
Ask Price: 1.200

If I place a Buy trade at the Ask price of 1.200 with 1 standard lot and make a 3 pips profit on EURUSD, then my profit will be $30, and vice versa for a loss, which will also be $30 (3 pips).

If I place a Sell trade at the Bid price of 1.100 with the same 1 standard lot and make a 3 pips profit on EURUSD, then I make the same $30 profit or $30 loss.

The difference is, in profit, I make $30 (account with spread) and $23 (account with zero spread). In loss, I lose $30 (account with spread) and $37 (account with zero spread).

So, if I am correct, then it is always good to use an account with spread. But why do most people prefer zero spread accounts?

 

[Enivid]

No, there is no definite answer to your question. The spreads look better because you don't take into account the fact that it's a much longer way for the trade to reach 3 pips of profit with a spread (5 pip movement) than with zero-spread and it's much easier to reach 3 pips of loss (1 pip movement).

 

[shanmugapradeep]

No, there is no definite answer to your question. The spreads look better because you don't take into account the fact that it's a much longer way for the trade to reach 3 pips of profit with a spread (5 pip movement) than with zero-spread and it's much easier to reach 3 pips of loss (1 pip movement).

So, Zero spread is good when the market movement is slow or for the currency pairs which have very low volatility

 

[Enivid]

So, Zero spread is good when the market movement is slow or for the currency pairs which have very low volatility

Not necessarily. Slow market or low volatility mean that your "spreaded" trade will take longer to get to TP.

 

[shanmugapradeep]

Not necessarily. Slow market or low volatility mean that your "spreaded" trade will take longer to get to TP.

Okay, do you know any forex broker with a truly zero spread trading account? I've tried platforms like ICMarkets Raw Spread, HFM Zero, etc., but all of these are not zero spread accounts; instead, they start from zero spread.

These trading accounts typically have only 4-6 currency pairs with zero spread, while the rest of them have spreads. I have to pay spread + commission in the name of a zero spread account.

For example, in ICMarket's Raw Spread account, for GBPJPY, the spread is usually 15 points + commission, whereas in the standard account, the spread is usually 15-18 points, and it does not charge commission.

I hate paying spread + commission in the name of Raw spread/Zero spread from a lot of forex brokers.

 

[Enivid]

Okay, do you know any forex broker with a truly zero spread trading account? I've tried platforms like ICMarkets Raw Spread, HFM Zero, etc., but all of these are not zero spread accounts; instead, they start from zero spread.

These trading accounts typically have only 4-6 currency pairs with zero spread, while the rest of them have spreads. I have to pay spread + commission in the name of a zero spread account.

For example, in ICMarket's Raw Spread account, for GBPJPY, the spread is usually 15 points + commission, whereas in the standard account, the spread is usually 15-18 points, and it does not charge commission.

I hate paying spread + commission in the name of Raw spread/Zero spread from a lot of forex brokers.

The last time I've used a zero spread account was with InstaForex Eurica account type. It was true zero spread, but commissions were very high. And that was about two years ago.

 

[jomina]

Hello,

In a zero spread account, brokers charge a commission. For example, in ICMarkets, for 1 standard lot, they charge $7 as commission for EURUSD.

If I place a Buy/Sell trade with $1 lot on EURUSD, for a profit of 3 pips, it will be $30 - $7 = $23, and for a loss of 3 pips, it will be -$30 - $7 = -$37.

This is simple and easy.

With spread, brokers maintain a price difference between the Bid (Sell) and Ask (Buy) prices. So, if I place a Buy trade, it gets placed at the Ask price, and if I place a Sell trade, it gets placed at the Bid price.

Bid Price: 1.100
Ask Price: 1.200

If I place a Buy trade at the Ask price of 1.200 with 1 standard lot and make a 3 pips profit on EURUSD, then my profit will be $30, and vice versa for a loss, which will also be $30 (3 pips).

If I place a Sell trade at the Bid price of 1.100 with the same 1 standard lot and make a 3 pips profit on EURUSD, then I make the same $30 profit or $30 loss.

The difference is, in profit, I make $30 (account with spread) and $23 (account with zero spread). In loss, I lose $30 (account with spread) and $37 (account with zero spread).

So, if I am correct, then it is always good to use an account with spread. But why do most people prefer zero spread accounts?

Zero spread accounts are popular because they offer clear pricing without hidden costs. Traders know exactly how much they're paying for each trade, making it easier to manage expenses. This transparency is especially helpful for strategies like scalping. However, the preference between zero spread and spread accounts varies based on individual trading styles and needs.

 

[bretzemlakmd]

The spread refers to the difference between the Bid (Sell) and Ask (Buy) prices in forex trading. In a zero spread account, brokers charge a commission instead. While trading with spreads may seem favorable, it's essential to consider that reaching profit or loss requires a more significant movement in the market compared to zero-spread accounts

 

[fargana]

Hello,

In a zero spread account, brokers charge a commission. For example, in ICMarkets, for 1 standard lot, they charge $7 as commission for EURUSD.

If I place a Buy/Sell trade with $1 lot on EURUSD, for a profit of 3 pips, it will be $30 - $7 = $23, and for a loss of 3 pips, it will be -$30 - $7 = -$37.

This is simple and easy.

With spread, brokers maintain a price difference between the Bid (Sell) and Ask (Buy) prices. So, if I place a Buy trade, it gets placed at the Ask price, and if I place a Sell trade, it gets placed at the Bid price.

Bid Price: 1.100
Ask Price: 1.200

If I place a Buy trade at the Ask price of 1.200 with 1 standard lot and make a 3 pips profit on EURUSD, then my profit will be $30, and vice versa for a loss, which will also be $30 (3 pips).

If I place a Sell trade at the Bid price of 1.100 with the same 1 standard lot and make a 3 pips profit on EURUSD, then I make the same $30 profit or $30 loss.

The difference is, in profit, I make $30 (account with spread) and $23 (account with zero spread). In loss, I lose $30 (account with spread) and $37 (account with zero spread).

So, if I am correct, then it is always good to use an account with spread. But why do most people prefer zero spread accounts?

Spreads can vary while commission is fixed. Sometimes when you need to enter a trade you may be forced to incur higher costs. In fixed spread you there is no uncertainty regarding this part of trading. But commission may be set in a way that it makes average trade more costly because no broker will introduce something may decrease profit for them (on average again)

 

[Zerologic]

As I know spread and commission are not fixed, ECN brokers offer zero spread doesn't mean bid and ask is fixed, I trade at FXOpen as they also offer zero spread but the spread could vary maybe depending on the market liquidity, while commission depends also with volume trades, simply put the higher volume hence commission could be lower.

 

[fargana]

Your are charged spread only once when you open position, since the price you see in mt4 is a bid price.