What Is A Low Spread Forex Trading?
Traders will often boost of how many pips they won in a particular trade. A pip is the smallest change in the price of currency pairs. When they say they earned ten forex pips, it means that the buying price of 1700 of the Euro/USD pair have increased to 1710. The monetary equivalent of that will depend on the amount being traded.
Traders naturally earn more when they trading substantial amounts. In the above example, supposing they really gained 10 pips while trading $100,000 lots, they earned $ 1,000.00 ($100,000 x .10). It’s double their investment of $500 if they are trading a 200:1 leverage.
Counting pips is important not only for accounting earnings or losses. They are important in the kind of trade you enter into. Brokers normally do not for ask fees for services rendered and instead let you buy a currency pair you want to trade with pips added to its prevailing quote price. The difference between the actual price and the price that the broker will let you have it is your payment for the transaction.
The manner brokers are paid for their services have weighty implications on your trade. Let’s say the broker quoted the above currency pair at 17005. This means that you gained just 5 pips. The other five goes to the broker. When the broker quotes a currency pair price with more pips added to it, it’s called low spread forex trading and when a quote carry minimal additions, its called low spread trading. A high forex trade reduces your potential earnings, while a low spread trading increases your trade earning potentials. Obviously, you will prefer low forex spread trading.
Now, a lot of brokers will tell you that they are asking for the lowest forex spreads in the market to encourage you to employ their services. You have to be careful in the choice of brokers as some are not actually transparent about current prices. You should check their quotes to make sure you getting the low spread trading you are promised.
Traders naturally earn more when they trading substantial amounts. In the above example, supposing they really gained 10 pips while trading $100,000 lots, they earned $ 1,000.00 ($100,000 x .10). It’s double their investment of $500 if they are trading a 200:1 leverage.
Counting pips is important not only for accounting earnings or losses. They are important in the kind of trade you enter into. Brokers normally do not for ask fees for services rendered and instead let you buy a currency pair you want to trade with pips added to its prevailing quote price. The difference between the actual price and the price that the broker will let you have it is your payment for the transaction.
The manner brokers are paid for their services have weighty implications on your trade. Let’s say the broker quoted the above currency pair at 17005. This means that you gained just 5 pips. The other five goes to the broker. When the broker quotes a currency pair price with more pips added to it, it’s called low spread forex trading and when a quote carry minimal additions, its called low spread trading. A high forex trade reduces your potential earnings, while a low spread trading increases your trade earning potentials. Obviously, you will prefer low forex spread trading.
Now, a lot of brokers will tell you that they are asking for the lowest forex spreads in the market to encourage you to employ their services. You have to be careful in the choice of brokers as some are not actually transparent about current prices. You should check their quotes to make sure you getting the low spread trading you are promised.
