What causes Spreads to change?

Discussion in 'General Forex Discussion' started by Sarah12, Sep 7, 2015.

  1. Sarah12

    Sarah12 Newbie

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    Dear Friends,I m kind of confused to what would cause spreads to change second by second,My broker offers both the fixed and variable spreads but would trigger the variable spreads to change with time? I would appreciate any help
     
  2. Fxpipper

    Fxpipper Master Trader

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    Spreads vary, depending on the quotes from the other traders, financial news, global cues and the demand..I could provide a long explanation but essentially, this is why spreads vary by the second.
     
  3. Enivid

    Enivid Administrator Staff Member

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    Variable spreads depend on the price feed generated by your broker's liquidity providers. The feed is based on the actual limit and stop orders placed in the market + broker's markup (profit).
     
    Last edited: Sep 9, 2015
  4. nikita sharma

    nikita sharma Trader

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    spreads vary due to quotes from the other traders, financial news, global cues.
     
  5. jameswilliam

    jameswilliam Trader

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    Spreads usually vary due to the liquidity and the upcoming economic events which causes volatility in the market. As at the time of major data releases like interest rate decision, inflation rates etc. volatility in the market increase, hence spreads widen.
     
  6. ema watts

    ema watts Trader

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    Agreed! During highly volatile hours and big new events spreads may vary drastically.
     
  7. ashouq

    ashouq Active Trader

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    Is there any change of spreads in fixed spread account offered by brokers.. ? sorry just a silly question i think.
     
  8. Hafizmd

    Hafizmd Active Trader

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    It seems to me that if they are fixed, they don't need to change...
     
  9. hedgescalp

    hedgescalp Newbie

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    hello,

    Spread is the difference between bid and ask price which a broker quotes you. bid price is where buyers are sitting willing to buy and ask price is where sellers are sitting willing to sell. So basically it depends on the liquidity and volume in that particular instrument. If liquidity is high spread will significantly narrow down and if liquidity is less, you will see a wider spread. Now there are two types fixed and variable, fixed is when spread is fixed at one point, it does not vary, generally the brokers who are market maker can provide you the fixed spread which you will see around 1.5 to 2 pips and even more than that. While, an ECN broker will not provide you fixed spread as they provide price feed directly from LP which can never be fixed, they will be variable only.
     
  10. ashouq

    ashouq Active Trader

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    Thanks for clarifying.. actually i was reading somewhere that many traders can't make money or either looses due to spread widening issues. Is that also happens in this fixed spread case!
     
  11. forxprotrade

    forxprotrade Newbie

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    hello Ashouq,

    Yes in case of fixed spreads also, traders can lose money. In normal trading hours, they tend to remain fix however in news time, they can also vary depending on volatility in the market. For example, if you take the case of news time, spread can widen significantly when important news is released due to increased volatility in the market. So if your broker is providing you fixed spread in that case he is probably a market marker because a pure ECN broker will always provide you the spread he is getting from the LP side which can never be fixed. And moreover, in this case, chances are high that you will see fixed spread on your side however your order will be executed at a different price which you can term as slippage. So either you will see variable spreads or you will get complete different execution.
     
  12. Martin Gaptil

    Martin Gaptil Trader

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    Volatility is a big fact here; I see maximum Forex brokers increase their trading spread during high voltage news session like FOMC, NFP! Besides, transparent Forex brokers are different, they never break their promise; frankly this type of honest brokers are very rare! You can judge a Forex broker according to their news session’s activities!
     
  13. Ary Barroso

    Ary Barroso Active Trader

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    I see, few brokers increase the number during the high voltage session! Of course, I don’t like this kind of situations.
     

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