Why you need a Low Spread Forex Trading Platform
Invariably, you will earn money from forex trading by having an effective trading plan. But the things you can do to maximize profits do not end there. A low spread trading platform also helps. In fact, it helps a lot.
Now when you trade through a broker, he will not ask you directly for a fee. He gets his money from forex spreads. It works this way. When you buy a currency pair the broker charges a spread on the transaction. You know about spreads. It’s the difference between the bid price and ask price. The bid price is what you pay for the currency and the ask price is what you sell the currency for. The difference is expressed in pips. This means that if a broker adds two pips to the bid price, you are paying him for the price of two pips. If you sell the currency right after you bought it, you will find yourself down two pips down. The more pips or spreads he adds to the bid price the more costly the trade becomes. This lessens the profitability of the trade and the bigger the risks. Meanwhile, the broker always earns no matter what happens to your trade. You have paid for his services in advance.
The method of paying for the services of brokers is the reason it is imperative that you find a low spread forex trading platform. Remember that platforms are supplied by brokers, so essentially you looking for a broker who offers lower spreads. Different brokers will offer different forex spreads. Some will offer lower or tighter spreads, while others will offer higher spreads. For big trades they will usually offer tighter spreads and usually higher spreads for small trades. Brokers will also vary their offers depending on market conditions. They may offer fix spreads and this usually happens when the market is volatile.
But usually you end up paying more.
The key to finding a low spread platform is to search for it. There are reputable forex websites issuing forex reviews. From the reviews you can easily tell which ones will increase your chances at earning in forex.