Forex Trading with Fixed Spread

As the world's largest financial market, Forex is full of unpredictability. No one knows how exactly the currency prices move in such a vast market. You can make calculated assumptions, but even those are based on the available information and past experiences. That is why the Forex market is considered extremely risky.

However, you can minimize the risks and make your trades more predictable by calculating the costs before entering a trade. In other words, by using a fixed spread.

What is Fixed Spread Account?

We already know that spread is the difference between the selling and buying prices of currency pairs. For example, if the GBP/USD is quoted at 1.3088/1.3090, then the spread is calculated as 1.3090 – 1.3088, i.e., 0.0002 or 2 pips.

There are two types of spreads, namely fixed and floating. As the name suggests, fixed spreads remain the same, no matter what happens. On the other hand, floating or variable spreads will fluctuate based on the currency price movements.

Spread is actually one of the ways Forex brokers earn money in exchange for their services.

Whenever you use fixed spreads, you have to pay a fixed fee for each one of your trades. For floating spreads, Forex brokers will adjust the spreads according to the price movements in order to earn their "service fee" in various market situations.

For example, when an important piece of news is announced, and the floating spread of GBP/USD fluctuates between 0.5 and 5 pips. You may find it difficult to close a position because you might suffer unexpected losses due to the fluctuations. On the other hand, the fixed spread remains 2 pips regardless of the market conditions. This is the notable difference between fixed and floating spreads that you need to take into account while calculating your trading costs.

Nonetheless, it should be noted that fixed spreads are usually higher than floating spreads because Forex brokers have to account for unexpected movements, volatility, profit, and so on, to prevent extreme losses. On top of that, in extremely volatile situations, slippage (for the market execution) and re-quotes (for the instant execution) may still happen. In that case, your trading process will be disrupted and may not go according to your initial plan. So, consider everything thoroughly before fully committing to a trading position.

Advantages of Fixed Spreads

Fixed spreads might not be the best option for your trades, but if you use them with the right strategy at the right time, you can definitely succeed in your trading endeavor. These are the advantages of fixed spreads:

✅ 1. Help traders know their bottom line

Variable spreads usually require a complex formula so you can calculate the exact cost. The cost of fixed spreads, however, is available in advance so you can calculate your profits and losses easier and develop your strategy better. This helps you minimize your risks and properly calculate your trading costs regardless of your trading volume, time, and interbank liquidity. In addition, this spread type ensures that Forex brokers cannot manipulate the prices in their favor.

✅ 2. Safeguard against market volatility

As you know, fixed spreads are always the same under various market conditions. So, you do not need to worry about how wide the bid and ask prices will fluctuate. This makes fixed spreads a suitable choice for beginners with little experience. In this way, they can learn about how to manage their funds more easily and effectively while looking for better opportunities.

✅ 3. More effective for short-term strategies

Trades are done by adopting either short term or long term strategies. Fixed spreads are ideal for traders who use short-term strategies, or scalpers. Fixed spreads are also perfect for news traders because they earn profits from the extremely volatile prices caused by the news events. Even EA traders can set up their trade parameters easily by using this type of spread, without having to adjust their trading algorithms according to the market conditions.

Best Fixed Spread Forex Brokers

Since fixed spreads are determined by the brokers and are usually higher than floating spreads, it is crucial to choose the best and most beneficial fixed spread forex brokers for your trading, given the fact that not all forex brokers are regulated.

The list below will help narrow down the best available choices for your convenience:
fbs broker
As a leading Forex broker, FBS offers various types of accounts using both fixed and floating spreads. There are three FBS trading accounts that come with fixed spreads, namely Micro, Zero Spread, and Crypto.

All of these accounts come with an execution speed from 0.2 seconds in an STP environment with a minimum deposit of 1 USD and a minimum order volume of 0.01 lots. The Micro account comes with fixed spreads from 3 pips with no commission and leverage up to 1:3000 for 31 Forex pairs and 2 metals on MT4 platform. The Zero Spread account comes with fixed spreads from 0 pip with a commission from 20 USD per lot and leverage up to 1:3000 for 31 Forex pairs and 2 metals on MT4 platform. The Crypto account is available on MT5 and FBS Trader platforms, with leverage up to 1:5, fixed spreads from 3 pips, and a 0.05% commission for opening as well as closing positions.

Payment methods: Bank wire, Credit Cards, Skrill, Neteller, Bitcoin, PerfectMoney

Regulations: CySEC, ASIC, IFSC, FSCA
Country: Cyprus
Founded: 2009

hycm broker
HYCM is a fully regulated Forex broker with 40+ years of experience that offers a fixed-price account. At HYCM, the fixed spreads start from 1.5 pips with no commission and a minimum trade volume of 0.01 lots. To start trading using this account on MT4 and MT5 trading platforms, you have to deposit a minimum of 100 USD. This account is swap-free; however, it is not available to EA traders.

Payment methods: Bank wire, Credit Cards, Skrill, Neteller, Bitcoin

Regulations: CySEC, FCA, DFSA
Country: Cyprus, UK
Founded: 1977

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