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Zero Spread Forex Brokers
In forex trading, the difference between a bid price and an asking price is known as a spread. Therefore a zero spread account is a type of account that has no difference between bid prices and ask price. A zero spread forex broker is a brokerage firm that offers its traders zero spread accounts. In other words, the spread takes the place of a typical transaction fees, meaning that you don’t have to pay anything.
With this unique account, you as the trader is aware of your entry and exit stages in advance. This means that when you open a trade in a particular position, you automatically know your exit point. This could be an enormous advantage to some traders.
While using a broker that offers this kind of account, it helps to understand that when the spread becomes bigger, the cost of trading rises. On the other hand, when the spread is narrow the cost stays low.
Though it may sound like no trader will be charged by a 0 spread forex broker, there is a probability that the broker will charge some traders in one way or another. In fact, there are numerous zero spread brokers that are keen on a particular range. This means that you might get charged, but the charges are not presented as you would expect as they may be in an indirect form.
Zero spread brokers
These types of brokers normally offer an Electronic Communications Network (ECN) or what is termed as a Straight Through Process (STP). They offer a much different approach to the traders in comparison to the typical forex trading brokers. With zero spread brokers, you get direct access to the available financial markets.
It is, however, important to note that the prices are not set by the brokers. Instead, they are set by the market itself.
The pros of zero spread forex brokers
If you sign up with a zero spread broker, it opens the doors for you to access the market directly.
As a trader, you know your entry and exit points beforehand as soon the positions are open. If you are into high-frequency scalping, then this kind of brokerage is extremely helpful with calculating non-trading loses. They also help you execute your day trading strategies with precision. Moreover, you can benefit from the speedy execution of your trading moves since you already have direct access to the relevant financial markets.
Efficiency is another advantage of using 0 pip spread forex brokers. The whole model of trading allows you direct access as well as fast executions; this can be attributed to the fact that there are no interventions from the brokers to your trading decisions. The trading systems are automated, which provides you a great deal of efficiency.
The cons of zero spread forex brokers
While you may think that you will not be charged by this kind of brokerage, some costs might apply in a hidden way. This is detrimental to a trader in that you may end paying various charges without exactly knowing how they came about. Some of these charges are disguised as a huge initial account opening size. Sometimes, you are forced to put with disappointingly low execution speeds.
Also, if you like to make the use of the Negative Balance Protection, it will certainly not help you with a zero spread forex brokers. Dealing directly in the market can be both good and bad. One of the ways in which this can be a disadvantage is that meeting the required liquidity threshold solely rests with you as the trader. For instance, the cost of opening an account is quite high and you have to meet it by yourself.
If you would like to try out a method of currency trading without having to pay hefty transaction costs, the zero spread brokers offer you a perfect opportunity to do so. Nevertheless, zero spread brokerage firms should be looked at more carefully. No trade that promises zero charges on anything really works that way. In fact, if you examine it closely, you may find out that you will be charged by these brokers in subtle ways that aren’t as clear cut as what you would experience with other options.
Source Article: https://fxdailyreport.com/zero-spread-forex-brokers/