Any Forex transaction without professional help is quite difficult as currency market is one of such tricky markets that can change the fate of the investor within the fraction of seconds. Low spread brokers are experts in delivering the promised to their clients. Before discussing the low spread brokers, let's look at few things you need to understand as an investor in currency markets.
• Spread: A spread is the difference between ask and the bid price. In short, it's the gain or loss you make out of your exchange transaction. There are a large variety of spreads such as bid-ask spread, yield spread, option-adjusted spread etc. Each of them has a prominent role to play in currency trading even though all would mean the same.
• Percentage in point (pip): pip is another term which traders use to indicate the spread of a transaction. For simple understanding, it is the difference that the trader makes from simultaneous buying and selling of currencies. In short, pip is nothing but a measure of spread.
The above mentioned are the basic aspects to be understood by any market participant in order to make some profit or to stay at a break-even. Generally, the majority of the Forex transactions for small traders happen over the counter while for the larger transactions there are specialized traders who execute transactions on behalf of the client in lieu of a commission. This commission is technically known as, spread and it varies depends on the volume of the transaction. Low spread brokers are one among such market makers who buy and sell currencies with some amount of risk involved. These brokers would trade in currencies with certain fixed or variable spreads depending upon the nature of the transaction.
Perhaps, these brokers are excelled in providing the least difference between the bid and ask prices, thus giving an option to buy less and sell more. The key advantage of trading with Low spread brokers' lies in lowering the cost of the transaction. The smaller the spread the more you earn out of a transaction. Buying and selling through Low spread brokers help you in making an extra edge in every small transaction. You don't need to buy larger lots to make more profits, buy smaller lots on a low spread broker you would be able to make much better gains.
Especially it is advised for small investors to buy smaller lots on low spread brokers as their risk appetite and capital both are substantially low. For an experienced trader, they can either go for one of its kind or can choose the larger volumes if they are able to take high risks for higher gains.