seen in the explanation given under "Spreads Definition and Explanation" that in financial terms the formula of the term spread is as follows: Spread Bid Price - Ask Price. A lower spread naturally ensures that successful trades will move into profitable territory earlier. And how a broker operating an ECN - STP model is the right choice (arguably the only choice) for traders who consider themselves professionals. Further Explanation, let's say that we are trading with EUR/USD.
So that is the straightforward, universal, method used to" currencies in the marketplace, now let's look at how the spread is calculated. AUS200.0.2 pips, uK100.0.0 pips, gER30.0.0 pips. As an example we may see the bid and ask prices as follow: Bid Price ( at which we can sell.2607. The spread in the forex markets can be described as the difference between the various buying and selling prices on offer for any particular currency pair.
Dollar / Chinese Yuan it.3070/6.2920 and that brings it to the spread level of 150 pips. So if we wish to buy EUR/USD from the Forex broker or dealer we have to pay.2609.S. In the above example the difference in the ask and bid prices.2609 and.2607 is 2 pips and hence we can say that the spread for EUR/USD is 2 pips. Now we have explained what spreads are and how they are calculated, it is important to stress the critical difference between the standard market maker broker with their advertised fixed spreads, and how an ECN - STP broker (such as fxcc) operates, whilst offering access. ECN broker or, sTP broker (Straight Through Processing) may not be able to. The simple definition of a "spread" is the difference between the buying and selling price of a security. This point also correlates positively with the above point. In the forex markets investors are still exchanging one currency for another, trading one currency versus another. Many traditional market maker forex brokers will advertise what they term their "low, fixed, forex spreads as being an advantage to forex traders. Our ECN/STP model provides our clients with direct access to the other Forex market participants (retail and institutional).