Forex spreads are one of the most important factors which decides whether a forex traders is going to be a successful one or join to the majority of traders and fail.  Therefore, it is super essential to fully grasp the importance of spread in forex trading since it has a significant impact on whether you are going to be a profitable forex trader or not. In very simple terms, spread is the difference between bid and ask price.  Ask price is always higher than bid price and difference is banked by the broker as a profit. This is the fundamentals of money making for a broker.

Before anything else, I would like to put forward that when you pick a forex brokers for your trading, low spreads should not be the only or primary criteria. Instead it should be in the bowl of criteria in addition to regulation, leverage, available instruments, funding and withdrawal options.

Best Forex Brokers With Low Spreads

BrokerSpreadsRegulationLeverageNext Step
Very Low CySEC, FCA 500:1

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Very Low CySEC 1000:1

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Very Low FCA, CySEC, Seyschelles FSA 500:1

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Low FCA, CySEC 2000:1

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Low ASiC, FCA 500:1

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Spread and Forex Brokers’ Revenue

Forex brokers are not in the industry as saviors who bother to deal with all the mess in order to be able to render you all those awesome services such as leverage, mobile trading platforms, wide range of instruments so that you would be able to invest in currencies even on your phone and grow your capital. Forex brokers’ one and only purpose is to make money out of your trades and spread is the most basic way for them to fulfill this purpose.

Wider the spread is charged, higher profit that the broker makes. You have guessed it right, guys. This extra profit for the broker by widening the spread is created at the expense of yours. So there is a zero-sum relationship between forex brokers and forex traders in terms of profit.

ECN Accounts

As a general thumb of rule in forex trading, it is believed that ECN forex accounts are the right ones for the traders who are very sensitive about spreads. I have explained here what an ECN forex account. Pepperstone’s Razor account and IC Markets’ ECN account have tighter spreads compared to standart forex accounts.

However, there is a very critical point to note about ECN accounts; the commissions. Forex brokers dont make quotes up themselves, they receive the quotes from a liqiudity provider with certain spreads and in order to be able to make money, they have to widen the spread. The brokers can not widen the spreads on ECN accounts, since they have to pass the raw quotes directly from liqiudity provider to you. Thus, forex brokers charge commissions on ECN accounts in order to earn revenue and in some cases those commissions could easily eat up your profit.

Why Does Spread Matter?

You are going to feel the pain on wider spreads stronger if you are an intraday trader or scalper where you are chasing few to several pips on your trades. Here is an example; let’s assume that you are scalper and your strategy is targeting only 5 to 10 pips. Now imagine that Broker A is charging 3 pips spread on EURUSD whereas Broker B is charging only 1 pips.

You are going to earn 2 pips higher on your every EURUSD trade if you trade with Broker B and that is equivalent to almost 50% of your total profit in the case that your take profit target is 5 pips. Thus you can improve profitability of your strategy as much as 50% by just switching from Broker A to Broker B.

Furthermore, spread is where those phony forex brokers generally try to manipulate the market conditions on their behalf. Widening spreads without the consent of the clients to gain more profit is the easiest and most common way of scamming traders in this industry. Spread is where you have to be over cautious for the sake of your capital and future earnings. You should monitor the difference between bid and ask price and compare it with what the broker advertised and offered you upon opening your account.

What is the Spread - MetaTrader

One easy way to monitor the spreads is by enabling Spread section on Market Watch window in MetaTrader platform. Make sure those spreads are what you were offered and charged when you open a new position.

Fixed spread could be considered as a solution against shady spread exercises. There are few forex brokers out there who offer fixed spreads which means that they guarantee that spreads won’t fluctuate at any moment. However, these type of brokers’ earning model poses another risk for profitable traders which I am going to talk about in another article.

Forex Brokers With Lowest Spreads

FxPro

Regulated by FCA,CySEC and SCB, FxPro is headquarted in London and one of the most prominent forex brokers in the industry. In addition to standard MetaTrader 4, FxPro is offering MetaTrader 5, cTrader and its own trading platform called Markets. This is the biggest edge of FxPro over other forex brokers; the variety of trading platforms. They are investing a lot for company awareness and image. Those of you who follow English Premiere League must have realized that FxPro is front shirt sponsor for one of the teams in the league.

The Company offers its customers three different account types; MT4, FxPro MT5 and FxPro cTrader. The spread for EURUSD on the MT4 account type could go down be as low as 0.6 pips. Spreads on MT5 account type are higher compated to MT4 where average spread for EURUSD is 1.4 pips. Expert Advisors are allowed for both MT4 and MT5 account types. On cTrader account type, the spread for EURUSD could drop to 0.0 pips. However, a commission of $ 4.5 is charged for every 1.0 lot order on cTrader accounts.

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HotForex

Established in 2010 and headquartered in Cyprus, HotForex is an award winning forex broker that offers a wide range of account types and trading instruments. The broker is pursuing a policy of providing the most convenient and advantageous trading conditions for the traders. They don’t discriminate between traders which means that scalpers, swing traders, day traders and expert advisors are all welcomed.

HotForex is a forex company that offers all the advantages and services for both experienced and newbie forex traders in one place; bonuses, low spreads, extensive educational material, reliable regulation. Therefore I would recommend HotForex for traders with any trading strategy and experience without hesitation.

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Tickmill

Tickmill was launched back in 2011 to provide traders with a great trading experience. With its headquarters located in both UK and Seychelles, the company offers its clients a wide range of account choices with respect to the status of tax and location. The UK headquarters is located in London and the accounts registered to this office are controlled by the Financial Conduct Authority or FCA.

Classic account and Pro account are two major type of accounts oferred by Tickmill. Classic account comes with the EURUSD spread as low as 1.6 pips. On the other hand, spreads on Pro account can go down to 0.0 pips with the commission of $2 per side on every lot.

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Exness

Exness was founded in 2008 in Russia and has grown into one of the most popular forex brokers in Europe since then. The Company is regulated by CySEC in Cyprus and FCA in UK. Traders are given the opportunity to choose between six different account types which are nano account (cent account), mini account, classic account, ECN account, fixed spread account and swap-free account (Islamic account).

The brokerage firm offers tight spreads on three different account types which are the Mini, the classic and ECN accounts. While no minimum position is necessary for the Mini account type, you can only have up to 100 positions open at a time. The spread for this account type is 0.3. For the other two types of accounts, the spread is 0.1 and you do not need to worry about limited numbers of open positions. You will be able to open the classic account with a deposit of $2000 and the ECN type requires $300 as a minimum deposit.

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IC Markets

IC Markets, an Australian-based forex broker, is regulated by ASIC, the Australian financial regulator. ASIC is one of the most trusted and respected regulators in the forex industry. IC Markets offers investors three different account types; ECN, cTrader and Standard account. Spreads on the ECN account are very low, but a certain amount of commission is charged according to the lot amount you trade per transaction. On the ECN account type, the average spread forf EURUSD can be as low as 0.1 pips. The commission per lot of the same account type is $ 3.0. On the standard account type, the spread for EURUSD may be down to 1.0 pips and no additional commission is charged.

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