Being Careful About Forex Spreads

It’s not surprising to find out that forex trading is gaining ground. It’s becoming popular. In fact, it’s considered the largest financial market with at least $4 trillion in trading volume each day. The internet has been instrumental in paving the way for a lot of people to dabble into forex trading. Aside from the new trading avenue, there have been improvements in different aspects of the trade. The cost of business has been made affordable with the shrinking of the bid/ask spreads which made the endeavor more profitable.

Forex brokers earn through spreads and commissions. Recently, most brokers have shied away from charging commissions and are currently earning through spreads because they can now fix buy/sell prices. Previously, the difference between both prices is quite wide thus making it more expensive for forex traders to do business. Because of competitiveness, brokers and market makers have narrowed down this difference considerably.

There is quite a number of forex companies which now allow spread trading. Although not advisable for long-term strategists, short-term traders and scalpers can earn additional profits through trading with the spread. Because of tighter spreads, these brokers have allowed scalpers to transact between the spread and pave the way for a more liquid market. In the future, forex traders can expect much narrower spreads because of increased trading volume.

Because of trading within the spread, forex traders can reduce the risks of forex trading. Aside from it, opening a mini account can also reduce the risks considerably. I’ve been trading foreign currencies using PLUS 500’s mini account. For just a 1/10 of the price of a standard forex account, I am now able to trade currencies with a limited capital exposure.