Forex is a great business
You can launch your FX trading today, without any paperwork, at a click of a button. But Forex trading is full of risks. A recent research study conducted by John Forman reveals that 99.6 percent of retail Forex traders are unable to achieve more than 4 back-to-back profitable quarters, which means that more traders are failing rather than winning.
The solution to these massive losses? Stay with a low spread FX broker. Low spread FX brokers are not only cost-effective; they’re also effective in reducing your trading risks and business losses.
But “what, exactly, is low spread?” you ask.“Why should I stay with low spread FX broker?” And how do I screen the bad low spread FX brokers from the good ones?”Keep reading…
This article answers all your questions.
What’s “low spread” inForex trading?
Your first task, as a Forex trader, is to understand Forex terminologists.
This is essential because you’ll be dealing with a lot of terms as you venture into the market. And one of the important terms that you need to know and understand is low spread. What’s does a low spread mean in FX trading?
To begin with, a spread, according to Daily FX’s David Bradfield, is defined as “the price difference between where a trader may purchase or sell an underlying asset.” Spreads are the major costs of trading currencies, and traders need to understand them to stay afloat in the FX market.
A low spread, therefore, entails a difference between the bid and the asking price. In other words, a low spread also tells you when market volatility is low (safer to trade during these sessions) and liquidity is high (not safer to trade during these market sessions).
For traders, low spread not only tells you the difference in the bid and the asking price. It also informs you about trade during less risky sessions to increase your gains and minimize your losses. In other words, it gives you more reasons to stay with a low spread FX broker.
Why should you stay with a low spread FX broker?
Because you don’t want to risk your money.Make no mistake, no matter how prepared you’re, no matter what strategy you employ, you’re prone to making wrong decisions and losing money in the FX market.
However, there are ways to minimize these risks and uncertainties.The easiest way to do that? You better stay with low spread FX broker because they’re the ones that offer scalping strategy.
The scalping strategy is a smart Forex trading technique, and it works as follows:
- buy a currency pair,
- hold it for a shorter period, and
- sell it for a small profit.
As you can see, scalping allows for faster, safer trading experience. Anyone can open and close a trade in a matter of minutes. Thus, it encourages traders, just like you, to trade more often and make more money, while gaining more experience about the reality of the Forex trading market.
It’s because of these kinds of strategies that you need to stay with a low spread FX broker. Stay with them to gain more profit while exposing yourself to less risky market volatility. But you have to be extra careful when choosing low spread FX brokers.
Let’s talk more about that next.
What to consider when choosing the best of the best low spread FX brokers?
Not all low spread brokers are good.
The majority of them don’t deliver what they promise to deliver, and they end up wasting your time and exploiting your resources. So, be careful. Before you make up your mind to stay with low spread FX broker, check out a broker’s slippage feature, as it makes or breaks your Forex trading.
As you probably know, slippage takes place when you send an execution order at a stated price, but then it gets executed at another price—other than the one you have stated. Real brokers won’t let that happen, and even when it happens (rarely), they work tirelessly to control the situation.
However, if you notice slippage frequently, and, everytime it happens your broker comes up with excuses, such as, “the market is volatile” or “the problem is from you,” then you may want to find another legit broker.
You should also watch out for any signs of manipulation. Fake brokers have the habit of setting and posting random spread quotes that are not seen anywhere in the market. That’s strange; watch out for that, too.
The bottom line
Forex trading, like any other business, has its risk factors. But you could avert some of the risks and kick-start your trading with a bang. If you stay with a low spread FX broker, you can minimize some of the major risks in FX trading and stay a lot longer in theFX market.
But you have to have background knowledge about:
- The meaning of low spread.
- The reasons for why you should stay with a low spread FX broker.
- The criteria for choosing and staying with the right broker, not with the ones that will manipulate you.
It’s about ensuring that you liaise with the right broker…with the broker that can help you succeed, not squeeze your savings. Do your homework. Strive to partner with a broker that will support you to learn, trade, and grow every step of the way.