Forex Spread in General
Forex quotes are offered with two prices: the Bid and the Ask price. The bid price is the price at which a Forex Broker is willing to buy the base currency in exchange for the counter currency. On the contrary, the ask price is the price at which the Forex Broker is willing to sell the base currency in exchange for the counter currency.
The difference between these two prices is called the Forex Spread and is measured in Pips.
For example (EUR/USD): Ask Price: 1.3100 | Bid Price: 1.3096
The spread is 0.0004 or 4 pips
Why Forex Spread is Important
Low spread in Forex means trading in low cost. Of course the trading spread offered by a broker should be regarded according to other important trading parameters such are:
1) The existence or not of trading commissions
2) Possible Re-quotes
The magnitude of spread is very important for day-traders and scalpers and by any other trader executing a large number of trades in a daily basis.
Which Forex Brokers Offer the Lowest Spreads
Usually ECN Forex Brokers offer the lowest spreads, spreads which are variable.
What is an ECN Broker
Using a Trading Rebate to Lower Spread
A Forex Trader can use a Forex Rebate Plan in order to lower his trading cost. A rebate plan may lower your spread and your total cost 30% or more.
Which Forex Pairs Provide the Lower Spreads
Popular Forex Pairs are certainly offering the lower spreads. The lowest spreads are found in EUR/USD trading and in GBP/USD trading.
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