When selecting a forex broker, one of the very important considerations should be the spread between the bid and ask price. This is the same as the buy and sell price.
Many brokers out there promise very low spreads, even less than 2 pips on some pairs. However, in reality, the truth about the spread can be somewhat different. Many brokers have slippage when executing an order. This is when your order is filled at a different price than when you clicked the execute button. The difference in the price will very often not be in your favour. This slippage can effectively mean a higher spread in real terms, possibly much higher.
Many brokers increase their spreads during volatile market conditions. For example one broker I used recently increased the spread to 25 pips on GBP/USD a few minutes prior to the release of the non-farm payroll numbers.
The level of importance of slippage and spread sizes ultimately depends on your trading style. For example, if on average you make just five trades per month, the cost of the spread is not going to affect your bottom line at the end of the month. However, if you scalp small time frames and make several trades per day, then the size of the spread you pay is going to have a very large effect on your bottom line at the end of the month.
Some broker that I have used in the past with consistent low spreads are:
ForexGen.com – This is a regulated broker .Spreads on some pairs can be even less than 1 pip. However, in my experience they did increase the spreads hugely during economic data releases.
| 
No comments:
Post a Comment