In Forex, the broker s do not help you for free. You can tell that they were very nice when they first approached you. They were smiling and they wanted you to open your account with them. It is the reason behind their smile and if you want to know how they can take money from you, the answer is through the spread. The brokers are the manager of youth money but that does not come free. They take money from you every time you place trades. This is known as the spread and depending on the broker, the spread can vary. Most brokers have a standard amount of spread and it is easy for the traders to overcome the spread. If the trends do not go against you and your strategy is working, you can expect that you will get a profit. However, a correct spread can help you to achieve your goal but a big spread can also make you lose your money. This article will tell you how this spread can help you to make money.
Always trade with the reputed broker
Those who live in Australia knows the importance of premium brokers like Saxo. Many people have lost a huge amount of money during news trading. They even don’t realize the key reason for losing a significant portion of their investment. The low-class brokers might even widen the spread to an extreme level and trigger your stop loss. Most of the time the spreads widen during high impact news release. Those who trade with well-reputed broker always have the best spread even at a high level of market volatility. This eventually reduces the risk of losing money.
At times you might even experience heavy slippage due to widespread. You can easily avoid such problems by choosing a broker like Saxo. Forex trading is a very sophisticated business and it requires proper trading environment for quality trade execution.
The types of spread
First, you need to know the types of spread. There are two types of spread that are offered to the traders. It is the fixed spread and the variable spread. The fixed spread is always fixed, giving a fixed amount of money to your broker before placing every trades. It does not change based on the volatility, the news and information, holidays and market sessions. The amount will always be the same but in the variable spread, it will change. Depending on the market volatilities, trends and also on the information, it will change from time to time. You need to keep an eye on your variable spread and try to find out the best spread to place your trades. The traders trade with different spreads and there is no consensus on the best spread.
A bigger spread is hard to overcome
When you are trading with bigger spread you will realize that it is harder to overcome. There are not many ways you can try to make a big amount of money in Forex. The professionals also aim for smaller profit because they know it is hard. If your broker offers high spread, you should give a second thought to your decision. It will not only take away your money but also keep your pressurized in the market. Even if the trends are in your favor, you will need them to stay for a long time. That is not possible for many traders. Your successful trade can turn into losses if the spread is big.
The variable spread in Forex market
The professionals believe that new traders should go for the fixed spread. If the variable is selected, they always need to analyze the possibility of making a profit in volatile trends to come over a changing amount of spread. In the fixed spread, you can trade easily because the spread will always be the same.