What is Spread in Forex?

As you will have no doubt seen on adverts, forex brokers offer a commission free trading solution. However this does not mean you trade for free, instead they give you a spread on the currency pair you wish to trade which is the difference between the ask and the bid price. The spread changes for each currency pair depending on how volatile it is.

For example the spread on the EUR/USD is between 1-2 pips, this means if you open a trade on this pair your trade will start off negative by -1 or -2 pips, this is the brokers way of making their little bit money out of your position. Spreads vary drastically from broker to broker some can be three times as much as a competing broker, it is very important that you don’t loose site of the fact that the size of the spread makes a huge impact on your income over a years worth of trading.

Another important reason why I like Interbankfx.com is because they allow you to use micro lots. Micro lots are positions of $1000 each giving you a profit/loss of 0.10c per pip and only require you to have $10 in your account. This will allow you to calculate and risk an exact 2% of your account no matter how small your account is. We will cover this in far more detail in the money management section. Which ever broker you choose to trade with remember you will always have trouble if you try to trade around important news events, that’s just the way it is and it’s not the brokers fault.

You should never have the need to trade the news with the systems in this course, the way I teach you to trade in this course is very low stress and you have plenty of time to execute your trades.  .10-minute-forex-wealth-builder.com 23 In theUnited Statesa broker should be registered as a Futures Commission Merchant (FCM) with the Commodity Futures Trading Commission (CFTC) and a NFA member. The CFTC and NFA were made to protect the public against fraud, manipulation, and abusive trade practices. Remember to check this if you are at all unsure about a broker you are planning on using.

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