In Forex trading, the term Floating Spreads is something that you may have come across. But, what does this term mean? Let’s have a more in-depth look at Floating Spreads, what it means, and how you can find the best Floating Spreads Forex Brokers.
What is a spread in forex trading?
Firstly, a spread is the word that is used to describe the difference between Forex prices – the Bid Price and the Ask Price. Pips are the measurement used to calculate the spread. The size of a spread is crucial in trading. Higher spreads result in bigger client losses during trading. Many brokers have different conditions for trading with various types of spread. Spreads are either Fixed of Floating.
A floating spread simply means that the difference in value between the bid and ask prices of a Forex currency pair is constantly changing. These spreads are also called variable spreads. They are different from fixed spreads in that with fixed spreads the trader knows the commission price in advance of the trade. With floating spreads, this is not the case. Here is a list of forex brokers that offer floating spreads.
Floating Spreads Forex Brokers List
MAS, JFSA, DIFC
The Floating Spreads Advantages and Disadvantages
Floating spreads Forex brokers usually emphasize the fact that they are really “market” type and are, therefore, narrower than fixed spreads Forex brokers are. This is essentially true, however, in practice, customers may face problems that they are not prepared for, particularly in a market that’s volatile and active. Additionally, some orders may be concluded at significantly higher prices than were indicated, but they cannot then raise a complaint with the broker. It is important to note that fixed spreads, therefore, are much more predictable and convenient for Forex trading customers when compared with a floating spread.
So, what about the advantages? The fact that floating spreads change during the course of the day, dependent on the available liquidity and market volatility, is the real plus here. You end up receiving the best market price when you are trading, which is often lower than trading with an account that operating on a fixed spread.
Floating Spreads Forex brokers can really offer you good value, if you are willing to take a punt and take the risk. Market volatility can affect floating spreads greatly, as can holiday periods and news releases.