Forex spreads

Forex spreads

are the amount of pips between the bid price and the ask price for a trade, it also represent two prices,the two price are the bid price and the ask price, bid price is buying price of currency pair, it also refers to the maximum amount that a foreign exchange trader is willing to pay to buy a certain currency, but the ask price is the selling price of currency pair, it also is the minimum price that the currency dealers is willing to accept for the currency, Forex spreads are the most commonly used terms in Forex, it is very important attribute of Forex market, it represents the value of currency pair to the trader and the broker, Forex spreads are subject to change, spread management strategy should be flexible enough to adjust to market movement.

there are many types of Forex spreads which is used in Forex trading, these types of Forex spreads include fixed spreads and variable spreads , fixed spreads are set by dealing companies for automatically traded accounts, it has two certain parts, one part is predetermined , another part may be adjusted by a dealer according to market, fixed spreads are constant, don't count on market conditions, variable spreads are low during times of market inactivity, it also can be widen during time of market volatility, its closer to real market, variable spreads represent the current market condition and the pairs liquidity.

regarding to the ways of minimizing the cost of Forex spreads, traders can minimize the cost of Forex spreads by following these rules, avoid trading exotic currency pairs, stay with the majors, because majors have very tight spread, whereas, at this time, the brokers and market makers compete against each other increase their market share, this competition make trader pay lower transaction cross with lower spreads, but less popular currency pairs with lower competition and liquidity will have higher spreads.

Factors that influence Forex spreads include effective of market indicators, financial conditions of deal, currency volatility, market liquidity, market conditions, inflationary reports, upcoming economic data, economic risks, political risks,, investors sentiment, interest rate changes, trading volumes or other.

Forex spread betting is a category of spread betting, which reflect the price movement of currency pair, also brokerages offer currency spread betting, trader bet whatever the price of currency pair will be lower than bid price, or higher than the ask price, the advantage of Forex spread betting is gives trader the ability to leverage and place bets on currency, moreover, traders don't need to actually own any currency.