In forex trading, the cost of a trade is determined by the pips, the spreads, the floating variable costs, the fixed trading costs, and in some cases no cost. Zero Pip Spread Forex brokers, are fx brokers that offer zero spread accounts with minimized cost of trading. This can turn into a big advantage for traders that trade big volumes.
Zero Pip Spread Accounts
Having a Zero Spread account simply means that the trading account offered by a broker has no difference between the two prices for a currency pair; the bid price and the ask price are the same. These accounts allow Forex traders to know entry and exit prices are in advance when they first open positions.
Accounts with a Zero pip spread are helpful when calculating losses that are not associated with trading, like slippage. They’re ideal for a variety of Forex trading strategies such as day trading and high-frequency scalping.
When brokers first started offering service, they advertised their low commission rates and low spreads as their main marketing tool. But, since the appearance of other types of brokers such as STP (Straight Through Processing) brokers and ECN (Electronic Communication Brokers) who compete for the best prices, the newest trend became Zero Spread accounts in order to tempt potential traders.
Zero Pip Spreads Forex Brokers List
MAS, JFSA, DIFC
The Advantage of Using a Zero Spread Broker
For small traders, Zero Spread Accounts provide an opportunity to calculate their trades exactly, without worrying about the widening or tightening of spreads. For example, during a big data release, such as the rate decision of a bank, if a trader is on the ‘wrong’ side of a currency, having a Zero Pips Spread Forex broker would allow the trader to change their bias without damaging their account due to a spiking spread.
However, when trading with such a broker there are disadvantages too. The fx brokers still need to make their money so they do it in other ways. They might offer accounts with fixed commissions, bigger size of account when opening, Margin Calls that are tighter, not applying a negative balance protection and execution speeds that are slower than other types of account.
Comparing Zero Pip Spread Forex Brokers
The first thing when comparing brokers is to look at the commission charged. Some brokers have a nominal fee or commission, in addition to adding a mark-up, despite their claims to be a Zero pip broker. Some brokers offer commission-free Zero Spreads. These tend to be liquidity providers who don’t send the positions of their clients to the market.
Overall, with Zero Spread trading, new traders can try out Forex trading without the exposure to higher transaction costs. But, remember, nothing is ever free. Traders need to examine fees, commission and the tactics of brokers very carefully if they wish to make money.