Why the best forex trading strategies involve no spread brokers

2 mins. to read
Why the best forex trading strategies involve no spread brokers

Are you fascinated by the movement of currencies across the world and want to turn that interest into some serious profit? If so, forex trading could be the perfect business opportunity.

Trading currencies against each other can be a great way to make quick returns, but it’s a risky sector to operate in. Currency values can change direction in an instant, turning an anticipated windfall into a major loss. And when that happens, it can put inexperienced traders out of the game for good.

Successful forex strategies aim to keep your options flexible. No spread brokers offer a great way to do so, providing customers with complete freedom to buy and sell. Here’s how their services work.

Understanding the role of spreads in the forex world

When you start trading foreign currencies, you’ll probably encounter the term “spread” pretty rapidly. And that’s a good thing, because understanding spread is crucial to managing your portfolio.

In the forex world, the spread is the distance between the amount you pay to buy a certain amount of currency and the price at you are able to sell it. Another way of looking at it is that the spread corresponds to the gap between what brokers will sell currencies for and what they will pay for them.

Generally speaking, popular currencies like pounds and dollars will have low spreads compared to riskier currencies, because brokers know that any dollars they receive can be easily sold.

Spreads are usually measured in “pips”, which correspond to 0.0001% increases in a currency’s value. The more pips a broker quotes, the more expensive it will be to trade with them, and prices vary from broker to broker.

How to avoid being caught out by the cost of spreads

For everyday forex traders, spreads can be a major factor in their calculations. That’s because many brokers impose limits on when clients can cash out. They will typically offer a “pip range”, below which traders can’t sell their currency, leaving them exposed should the currency depreciate.

Many smaller traders find that this can be a serious headache. No-one wants to see their dollar position strengthen into a healthy profit, but be denied the chance to sell before the position evaporates.

That’s what makes forex no spread brokers so appealing. This kind of broker doesn’t impose pip ranges, letting you buy and sell at whatever price makes most sense. So you can instantly realise the value of a smart call, regardless of what brokers think.

Naturally, there are some potential downsides. Some no spread brokers offer limited customer support, while others require large minimum account sizes, and commission costs can vary as well. So it’s always a good idea to shop around and find the most competitive brokers out there.

So always factor spreads into your forex strategy. When you calculate your profit at the end of the quarter, you’ll definitely be glad you did.

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