HFM information and reviews
HFM
96%
FXCC information and reviews
FXCC
92%
FxPro information and reviews
FxPro
89%
FBS information and reviews
FBS
88%
XM information and reviews
XM
86%
NordFX information and reviews
NordFX
86%

What is Spread, and Are You Better Without It?


Spread is a central element in Forex trading. Traders are keen to know and ask a lot of questions about it. While spread exists in various sectors of the financial market, this article will explain it in the context of Forex trading and highlight Olymp Trade’s offer relative to it. This way, it may be as informative as practically useful for traders.

What is Spread?

There are usually two prices on the financial instruments’ charts in most brokers’ trading terminals, Bid and Ask. The higher one is Ask, it’s the price you buy for. The lower one is Bid, it’s what you sell at. The difference between the two is spread. That is the technical definition of spread.

The financial one is that traders pay spread for trading on Forex. As such, spread is a transactional commission included in the price of a financial instrument.

What Affects Spread?

Broker sets spread on each financial instrument based on their chosen strategy. That’s why spreads differ across brokers. Usually, the size of spread is directly related to a financial instrument’s risk profile. The greater the volatility, the wider the spread may be. The more stable it is considered, the tighter the spread will normally be.

In Forex, mainstream currency pairs such as EUR/USD, EUR/GBP, or GBP/USD are considered as relatively stable and not very volatile. In contrast, less traded and lower liquidity currency pairs frequently have higher volatility and, therefore, are of higher risk profile. These include AUD/JPY, USD/CHF, AUD/CAD, and CAD/JPY.

What Kinds of Spread are There?

Brokers frequently offer fixed and floating spread accounts. With a fixed spread account, a particular spread is fixed on all financial instruments, and the market volatility no longer affects it. In this case, a trader knows that even if the market conditions change, he’ll pay the same spread to open trades. Therefore, this account type provides predictability of the process and makes it easier. This is the primary reason for its popularity among beginner traders as they can learn trading in the fixed set of market conditions.

However, usually, fixed spreads are wider, on average. Therefore, fixing the market conditions for a trader may come at a higher transaction cost.

With a floating spread account, the financial instruments’ prices are exposed to real-time market volatility. In this case, opening a trade a few seconds later on the same instrument may not offer the same spread. Exposed to the market volatility, traders have a less predictable environment, and, therefore, have to be more precise and time their trades well. That’s why floating spread accounts are more attractive to experienced traders. At the same time, floating spreads are often tighter than the fixed ones. Therefore, while exposing traders to higher risks, this type of spread may result in lower transaction costs.

Mid Price, No Spread with Olymp Trade

Olymp Trade’s platform doesn’t function on the basis of Ask and Bid. Instead, there is a Mid price, an average between the two. On the one hand, it brings simplicity to reading the charts. There is no more confusion between Ask and Bid price.

On the other hand, it resolved the issue of transaction costs. Instead of spread, there is a commission on each trading instrument. Together with the overnight fee, these are all the commissions on the Olymp Trade platform.

Therefore, with this approach, traders have a predictable and clear trading environment with low transaction costs. Effectively, this approach provides traders with the advantages of spread-on account types in combination without their drawbacks.

Conclusion

Spread is the difference between Ask and Bid prices. It may be fixed or floating. The fixed one brings predictability but may cost more. The floating one may offer more risk but cost less. Olymp Trade offers trading based on Mid price. Instead of spread, there are commissions on trading instruments. This approach lowers transaction costs and adds predictability to trading.

Olymp Trade clients can get detailed information about all commissions on a specific asset, for example, the EUR/USD currency pair. Detailed information about Forex trading as well as other trading mechanics of our platform can always be obtained from the Help Center. And, of course, if necessary, our Support service will always be there to help you.

#source


RELATED

Ultimate guide to trading Bitcoin for beginners

Bitcoin is the world’s first cryptocurrency that paved the way for the multi-trillion dollar crypto market we can trade and invest in today. Read on to learn everything you need...

How to Trade the Fed Rate Decision - Guide for 2022

The Fed funds rate is one of the most important benchmarks for investors and traders all over the world. Its adjustment significantly affects exchange rates and the economic situation of countries...

Unlocking Potential: A Comprehensive Exploration into Day Trading

In the fluid and ever-evolving universe of finance, day trading has surfaced as a pivotal activity for individuals desiring to traverse the bustling waves of the stock market...

Moving Averages: Unveiling Trends and Price Patterns

Moving averages essentially create a single continuous line that represents the average closing price over a specified timeframe...

Demystifying the 60/40 Rule in Forex Trading: A Comprehensive Guide to Tax Implications

Forex trading, also known as foreign exchange trading, is a dynamic market where currencies are bought and sold globally. The primary aim of forex traders is to make profitable trades...

A Comprehensive Guide On How To Trade USD/CAD Currency Pair

The USD/CAD currency pair represents the relationship between the US dollar and the Canadian dollar and is a favored choice among currency traders due to its active trading hours...

What are derivatives in finance?

When referring to derivatives, it is about financial agreement that establishes a value through the value of an underlying asset. This means that they have no value...

Top 5 Trading Books to Read in 2022

Just a guess: you’re new to trading and you think that trading is all about luck and intuition, right? Not really. In fact, being an efficient trader means more than just buying or selling assets

Why User Identification and Verification Are Vital for Trading

When you join FBS, or any other financial company, for that matter, you need to pass a verification process to get full access to the services. You may feel...

Understanding Cross Trading: An In-Depth Analysis

In the labyrinthine world of finance, cross trading stands out as a debated and intricate transactional practice. While it offers certain efficiencies, it’s also encased in a thick layer of regulatory...

Money Management: One of the Keys to Success

Online trading of currencies (Forex), cryptocurrencies, and CFD deals with other financial assets (stocks, gold, oil, etc.) offer unique opportunities...

Exciting Benefits of Trading Forex

Forex trading is the exchange of one currency for another to generate profits. If you’re reading this, you probably know that and are now looking to choose between the existing options like stock...

How to buy cryptocurrencies for beginners?

To venture down the path of cryptocurrency trading, one needs a good understanding of what trading typically entails. We’ll be looking at both topics in this article...

How to trade stocks and CFDs on stocks

We continue our series of articles on choosing a trading instrument. This time you will learn what CFDs on stocks are, how to trade them and how...

A Beginner’s Guide to Bonds – How and Where to Buy and More

Besides forex and stocks, bonds are another popular class of securities that attract many investors. In fact, bonds are traditionally a core component in many types of portfolios, most famously in conservative strategies...

Navigating the Transition from a Full-Time Job to Forex Trading

Embarking on a journey from a traditional full-time job to the world of forex trading is a path increasingly chosen by many. This decision, while potentially lucrative...

Swap, Spread and Everything You Need to Know about Forex Market Commissions

It comes as a surprise for many newbies to see a negative balance when they open their first trade, although the price has not moved. It comes to...

How to Trade Major Currency Pairs

The major currency pairs traded by forex traders around the world are the following: EUR/USD, GBP/USD, USD/JPY, USD/CHF, USD/CAD, AUD/USD, NZD/USD...

Understanding Financial Market News and Trends

There are many ways to trade the financial markets, all of which require a good understanding of financial market news and trends. This requires a combination of knowledge...

Trading 101: Trading with the Trend

Trading with the trend is favoured among traders as it allows them to make the most out of momentum in the markets. If you are new to trading, you can look...

Vantage information and reviews
Vantage
85%
FP Markets information and reviews
FP Markets
81%
IronFX information and reviews
IronFX
77%
T4Trade information and reviews
T4Trade
76%
Exness information and reviews
Exness
76%
Just2Trade information and reviews
Just2Trade
76%

© 2006-2025 Forex-Ratings.com

The usage of this website constitutes acceptance of the following legal information.
Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website (reviews, brokers' news, comments, analysis, quotes, forecasts or other information materials provided by Forex Ratings, as well as information provided by the partners), including graphical information about the forex companies, brokers and dealing desks, is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Forex Ratings shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about the forex companies. The entire responsibility for the contents rests with the commentators. Reprint of the materials is available only with the permission of the editorial staff.
We use cookies to improve your experience and to make your stay with us more comfortable. By using Forex-Ratings.com website you agree to the cookies policy.