Investing in forex market, you must be asking a lot of questions at the beginning. One of the most popular issues I am being asked about is spread, in particular, which brokers provide the lowest spread. Somehow, the spread that brokers offer you is just a number or their income, while spread matters to traders’ benefit, too. All we know that, as a trader, the lower spread, the better it is. However, before coming to the list, I would like to clarify some definitions that people usually get confused and for you to make sure that what do you exactly need from a low-spread forex broker.
Don’t mistake spread with Bid and Ask price, I see a lot of men do. Both BID and ASK are exchange rate but BID is applied for purchasers and ASK is for people who sell the currency. In general, ASK is always higher than BID and the difference between them ‘s so-called spread. We can see that it represents the brokerage service cost or we can basically understand that spread replaces transaction fee. The higher the spread is, the higher the transaction costs. So low spread can benefit traders.
- Is commission the spread?
Firstly, I want to make sure that you know we have 3 types of brokers in the game Market Maker, STP, and ECN. And spread is the main income for the first 2 types, so it’s expected that they might offer higher spreads than ECN, where profit comes from commission. For brokers who benefit from spreads, they will Mash Up transaction fee to quotes while ECN brokers would present you the origin number and they charge you commission as a service charge.
Thus, if you got an account to trade with Market Maker or STP brokers, what you have to pay lies in the spreads. However, in case you are trading with a ECN, the spread is really nothing and you pay commission separately.
Check out the best broker types.
Based on 3 types of brokers I mentioned above, I would like to shorten my list into Non-ECN brokers (Since ECN would always offer the lowest so it’s pointless to tell you, I’d better tell you which is an ECN broker) and you can take my advice as below:
Top 5 non-ECN brokers who offer the lowest spreads:
However, it’s not any of the list is what anyone’s looking for. Every broker is regulated by different policy and each of them will help you in different ways. First, let’s see which types of traders you are.
- Who really needs a low-spread broker?
Traders will trade in short term and long term. If you do forex in a short time, we call you scalpers. And because you start positions and close them in a short time, costs you pay for trading are spread and commission while you earn only pips for an order, I could tell you need a low spread brokers.
However, for long term investors, things are different. If you invest in a long run in a position, what you can get is far more than pips but hundreds of them and you’re asked to pay swap (service charge to keep accounts opened in a long time) instead of commission, 2% of your profit is maximum fee to pay for spread. Thus, no need for you to look for a low spread broker but a law swap one.
Besides your type of trading, brokers matter a significance, too. Because their policy can affect your profit.
- Spread in US and UK?
In comparison with other country such as Australia or CySEC, brokers in US and UK are charging the highest spread and commission, despite the fact that they are two biggest market. According to my experience, the high spread affects their competitiveness a lot in the field. You can see table below as illustrations for what I just mentioned:
Here are the spreads for EUR/USD of top forex brokers:
|Broker Name||EUR/USD spread||Regulation|
|Exness||0.7 Pip (Classic account)||CySEC, FCA|
|Hotforex||1.1 Pip (Premium account)||Vincent|
|FBS||1.1 Pip (Standard account)||Belize|
|XM||1.7 Pips (Zero account)||FCA (UK)|
|FXTM||1.7 Pips (Standard account)||Belize|
|Forex.com||1.8 Pips||NFA (US)|
|FxPro||1.7 Pips||FCA (UK)|
As you can see, the CySEC broker, Exness is offering the lowest spread while XM or Rorex.com are offering double of that.
Simply, you can see it this way. Regulation fee in US and UK is more expensive than other country, Asia for instance and the regulations ban them to offer high leverage, too, so they must increase spread and commission as the main income.
So, if you’re looking for a low spread and commission brokers, note Exness as the top for Asia or Europe countries. In general, better pick the local brokers because of local regulations.
- What should you choose over the other?
However, beside the low spread, there are many issue you must consider while picking up a broker to trade with. A good and suitable broker is the best for you and low spread is just one of reasons.
After listing down my list above, I would like you to do more analysis on the best forex brokers Brokersguru that you’re keeping an eye on and find the best low-spread broker for you. My suggestions for criteria as below:
- A fine regulated broker: As I suggested, better choose a local broker. A broker which is regulated by your country can serve you the best and you’re protected well.
- A broker with speedy safe and sound payment system: a good payment system will allow you to make transaction at the best condition. It’s also for your convenience in withdrawal. In general, some brokers with low spread and low withdrawal cost and deposit at the same time, don’t waste much of your money on doing payment while they’re possibly free.
- Local supporters: even you’re an expert or an amateur, you are suggested to trade with a broker with its office at your place. For you to get the best assistance at any point, it’s not a simple issue to ignore.
To sum up, I suggest you the top 5 brokers with lowest spread, but to choose the best for yourself, let’s take an overview of your forex job first then to qualifications of brokers to find the best for you. They are the best of the world but it doesn’t mean they are all perfect for your trading styles and business.
Brokersguru proudly brings you this article. “The lowest spread brokers” is written by Mr. Bruce Kovner, an expert in forex trading for many years. Mr. Kovner chooses Brokersguru, which is in Thailand, due to its dedication and commitment to give forex traders trusted, safe, and professional knowledge about forex brokers.