Forex Trading Library

Raw Spreads vs. Fixed Spreads: Which is Better for Forex Trading?

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Please be advised that the zero spread offer mentioned in the article has now expired.

 

Forex trading is one of the most popular forms of online trading, and it’s not hard to see why. The foreign exchange market is the most actively traded market in the world, as it relates to the conversion of one national currency into another.  

With the potential for high profits and the ability to trade 24 hours a day, forex trading has become the number one traded market for individuals looking to leverage their capital and make money trading. 

Why Trade Forex with CFDs?

In simple terms, a forex trader’s objective is to make profits by buying and selling currencies at favorable rates. Most traders opt to trade forex with some form of leverage, and one of the most common ways to do so is with CFDs.  

Contracts for difference, or CFDs in short, are agreements between two parties to exchange the difference in value of an underlying asset between the opening and closing of a contract. By trading CFDs, traders can speculate on the price movements of various currency pairs without owning the actual currencies. 

One reason for CFDs’ popularity among traders is that they are easily accessible and can be traded online and on any device. More importantly, however, with forex-CFDs traders are able to buy or sell currency pairs with leverage. Leverage enables traders to increase the size of their positions by hundreds or even thousands of times, giving them an opportunity to make much higher returns on their trades. 

While trading forex with CFDs can offer traders a much bigger profit potential, it is important to understand that there is also a higher risk of loss. Moreover, traders need to consider the costs associated with trading, which can impact their profitability margins. Some of the most common forex trading costs include swaps, spreads, and commissions. 

What are Spreads?

In forex trading, a spread is the difference between the bid and ask price of a currency pair, which represents the cost of trading. The lower the spread, the less traders need to pay to enter and exit a trade. 

There are two most common types of spreads in forex trading: raw spreads and variable spreads. Variable or floating spreads are defined by the constantly changing value between the ask and bid prices depending on supply, demand, and total market trading activity. 

On the flipside, Raw spreads represent the real market prices of currency pairs, without any markups added by brokers. They are usually very low or even zero and fluctuate according to market conditions and liquidity. Brokers like Orbex will offer ZERO Spread Trading Accounts to traders so that they are able to enjoy low-cost trading and benefit from potentially higher returns. 

Raw Spreads: Pros and Cons

One of the main benefits of raw spread trading is that it can lower your trading costs significantly, especially if you trade frequently and/or in large volumes. Raw spread trading accounts will also typically offer faster execution, which is the time it takes for the broker’s platform to execute your trades. 

Raw spread trading accounts are ideal for short-term trading strategies like hedging or scalping, which involve opening and closing trades quickly with the aim of making small profits. These accounts are also very popular with EA traders who like to employ algorithms or bots to automate their trading. More importantly, with the near-zero cost of raw spread trading, any profits you make when trading forex are yours to keep. 

That being said, it’s important to watch out for any hidden fees that a broker may charge on raw accounts, including commissions, swaps, and withdrawal charges. While most brokers charge up to $10 commission for every traded lot on raw spreads, Orbex gives its traders the opportunity to benefit from some of the lowest flat commissions on raw spreads at just $1 per side lot. Moreover, the Orbex ZERO Spread Account features $0 overnight swaps for all traders. 

Why Choose Orbex ZERO Account

The Orbex ZERO Spread Trading Account is designed to offer traders the ultimate trading conditions including our lowest available costs on forex trading with spreads, fees, and swaps from 0, and a flat $1 commission fee per side lot.  

As an Orbex client you will also gain access to a competitive multi-regulated trading environment with free Trading Central market analytics, exclusive trading resources, advanced MetaTrader platforms, and much more. Whether you are a beginner or an experienced trader, you can benefit from the Orbex ZERO account’s exclusive features and tools! 

 Start your forex trading journey with Orbex! 

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