Fixed spreads are set by the broker and don’t change regardless of market conditions or volatility. The spread offered is the spread you pay. Although variable spreads marketed at 0.1 pip look more appealing, fixed spreads can potentially save you more money throughout the course of your career. This article will focus on the benefits of fixed spreads in forex that will be discussed below.
In forex, fixed spreads mean transparent costs. You know exactly what you’re going to pay for each time you trade, regardless of interbank liquidity, time of day or trading volumes. This makes sure that brokers can’t manipulate the spreads in their favor.
By applying fixed spreads, you can greatly cut down the cost of trading. Fixed spreads offer no surprises, making sure you can budget the costs of transactions well in advance. This will greatly improve your ability to manage costs over the course of your trading career.
Easier News Trading
Volatility in the forex market has become usual and isn’t limited to news events. While variable spreads may be helpful during quieter market times, fixed spreads are ideal for volatile market conditions, which just also happen to provide more opportunities to make money.
Safeguard Against Volatility
Trading the news is one of the most effective ways to make money in the forex market. Unfortunately, variable spread accounts can make news trading very confusing because of how wide the bid and ask levels fluctuate. By using a fixed spread, traders may approach news trading as they would any other market condition.
More Effective Scalping
Scalping – a forex trading strategy in which a trader makes a large number of trades in a short period of time to earn a small profit each time – is much easier and more predictable using fixed spreads. Because scalpers often make money on very narrow profit margins, using fixed spreads ensures that the difference between the bid and ask levels don’t change too drastically.
See Also: Learn About Fixed Income
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