Spreads and types and its effect on the account
Some traders believe that the spread does not impact their profits as long as they execute their trades in line with the trend and achieve their daily target.
However, some may not realize that the spread does indeed affect their profits as traders. The lower and narrower the spread, the higher the profits you will receive. The spread is the commission deducted by the brokerage company for executing your orders in the market, whether you're executing a buy or sell order.
As a trader, the lower the spread, the better for you, as it means entering and executing trades in the market with a smaller negative balance, supporting your trading operations, especially if you rely on scalping.
If we look at a simple example from our daily lives, when you go to a bank or a currency exchange office in your country and exchange currency, the selling price differs from the buying price. This difference is the commission earned by the bank or currency exchange company for acting as the intermediary in changing the currency for you. This is the spread in terms of brokerage companies.
Understanding the Spread or Price Spreads:
The spread in forex trading is the difference between the buying and selling prices, and this difference is determined by the volume of bids and offers available in the forex market. The spread, also known as the price difference, is the commission earned by the brokerage company. As explained earlier, a low spread indicates significant liquidity, which helps traders reduce their transaction costs. The wider the price difference between buying and selling, the higher the cost of the transaction for the trader, and a large portion of the trader's profits may be deducted as the spread until they reach their specified target and achieve profit.
Types of Spread:
Exness offers various financial tools using dynamic spreads and also provides trading advantages using fixed spreads, but they are not available on all currency pairs. Here's a simplified explanation of the types of spreads at Exness:
1. Dynamic Spread:
Also known as variable spread, it depends on market fluctuations and may widen or narrow. These continuous changes are described as dynamic.
2. Fixed Spread:
Most of the time, the value is fixed, providing traders with predictable trading costs.
Financial tools that provide stable spreads are usually available almost all the time, except during periods of market price volatility.
OLX FOREX recommends Exness for its low spreads, which help traders increase their profits and enhance their gains because the spread is crucial, especially for scalping traders who rely on rapid profit and few points, closing trades quickly for instant execution provided by Exness to all its clients.
Exness also offers very low spreads on all types of trading accounts, typically ranging from a quarter of a pip to three pips on most currency pairs and metals.
- Learn more about the diverse accounts and price spreads for each account, as well as the features offered by Exness, from here
