A spread is a method most brokers use, particularly those who do not charge a commission, in order to earn a profit from facilitating trading activities online. Brokers generally quote two different prices for assets: the buy price (bid) and the sell price (ask). The difference between the two prices is the profit earned by the brokers in exchange for providing a trading platform.
The following are some of the top fixed spread brokers:
This broker has been providing traders with access to the global markets for more than a decade. Traders generally consider Xtrade as one of the most reliable trading platforms available. Xtrade offers web-based, mobile and tablet trading platforms. The minimum required deposit to start trading with Xtrade is $200, however, occasionally the broker will have promotional offers for lower capital requirements. Xtrade users have access to CFDs, commodities, stocks, Forex, cryptocurrencies, ETFs and bonds.
Now one of the top brokers based in the UK, Mason Ford aims to provide investors with a top-notch trading experience with a streamlined and user-friendly platform. Mason Ford is proud to say it offers some of the most competitive spreads in the industry. The broker uses the WebTrader platform which is totally web-based, meaning there is no downloading required. There is a $5,000 minimum deposit required for a starter tier account with Mason Ford. Traders using Mason Ford also have access to more than 300 asset markets, including stocks, Forex, cryptocurrencies, commodities, indices and more.
With a focus on the needs of customers of varying trading experience and income levels, TrustFX is one of the best brokers based in Europe. The broker provides a user-friendly interface which provides lightning-fast trade execution and a secure environment to trade markets. TrustFX provides traders with access to various platforms including MetaTrader 4, WEB Platform and Status. The minimum deposit for the lowest tier account is $250. Traders using TrustFX will have access to trade stocks, indices, commodities, cryptocurrencies and Forex.
For being a relatively new broker, Olympia Markets has certainly built a strong reputation for itself quite rapidly. The broker’s success is due to having a trader-centric business model which focuses on providing the best trading experience possible while also providing a safe and secure platform. Olympia Markets offers a fully web-based platform which means you will not need to download any type of software. The minimum required deposit for trading with Olympia Markets is 250 euros while the maximum deposit is 30,000 euros. There are over 400 tradable assets on the Olympia Markets platform, including Forex, indices, stocks, cryptocurrencies and commodities.
Empowering everyday retail traders to have access to many of the same lucrative markets as institutional investors is the main objective for IC Markets. The broker boasts a low-latency online platform with minimal slippage. IC Markets provides users with access to pricing which had previously only been available to investment banks and the extremely wealthy. They offer access to the MetaTrader 4 and cTrader platforms. IC Markets only requires a minimum deposit of $200 to start trading. Traders on the IC Markets platform have access to Forex, commodities, indices, bonds, cryptocurrencies, stocks and futures.
Headquartered in Europe, 2Mercados has clients from over 100 countries worldwide. 2Mercados aims to remove barriers to entry for all investors looking to trade the financial markets, no matter how much capital one has to invest. The broker provides users with access to the MetaTrader 4 platform as well as a web-based platform. There is only a $250 required minimum deposit for the beginner tier account. 2Mercados offers traders access to CFDs, Forex, stocks, cryptocurrencies, indices and commodities.
Using the latest in technological advancements has made CapitalXP one of the most powerful trading platforms available. The platform has implemented high-level security technology to ensure you have a safe trading experience. CapitalXP uses the MetaTrader 4 platform and also integrates a mobile app for your convenience. The broker has a minimum deposit of $250. Forex, stocks, indices and commodities are available for trading on the CapitalXP platform.
Take a look at the full review of CapitalXP
This broker has more than a decade of experience providing traders with a dependable platform. GSI Markets has quickly become one of the leading trading platforms in the world since it was first established in 2003. The broker uses WebTrader, Sirix and MetaTrader 4 for its platforms. The minimum deposit required to trade with GSI Markets is $250. GSI Markets users also have access to Forex and CFD trading.
Since being established in 1994, TeleTrade has won numerous awards which have earned it a strong reputation in the financial trading industry. With over 25 years of experience in the markets, you can be sure that TeleTrade is a legitimate broker providing a dependable trading platform. TeleTrade users can access the markets using various platform options: WebTrader, Meta Trader 4, Meta Trader 5 and mobile. You will have access to a variety of tradable markets with TeleTrade including Forex, metals, indices, CFDs, energy, stocks and cryptocurrencies.
With nine years of experience in five different markets, KronosInvest provides an intuitively designed platform which makes trading understandable to traders of all experience levels including those with absolutely no experience at all. KronosInvest is also known for its highly responsive customer support team, which is available 24 hours per day, 6 days per week. KronosInvest users can choose from MetaTrader 4, Status WebTrader and mobile platforms. To start trading with KronosInvest, you will have to make a minimum deposit of at least $250. Forex, stocks, indices, commodities, stocks and CFDs are available to be traded on the KronosInvest platform.
As one of the most trustworthy brokers available, you can be sure your trading experience with Grahamalpha will be solid. The broker is known for its quality trading platform which provides fast trade execution as well as high-level security technology. The broker provides integration with the following platforms: Activ8, its own web trader solution and mobile options. Grahamalpha’s menu of tradable assets includes Forex, commodities and indices.
What is Fixed Trading?
Brokers whose spreads remain unchanged regardless of market conditions provide what is known as fixed trading. Fixed trading is generally offered by brokers which operate under a market maker business model. In this way of operating, the broker purchases large positions from liquidity-providing entities and then offers these market positions in smaller portions to retail traders via a dealing desk. Essentially, the fixed spread Forex broker is acting as the counter party for trades which allows the broker to offer fixed spreads to traders by controlling offered prices through the dealing desk.
Since the broker’s market positions have been pre-purchased, there is less need to maintain a larger liquidity buffer. This means that the fixed spread broker will require less capital from retail traders to maintain their positions in the markets on the broker’s trading platform. Investors executing trades on a platform with fixed spreads are better able to plan trades, knowing that the listed price will be the actual price a trade is filled at.
Fixed spreads can greatly help traders endure periods of great volatility in the markets. During these times, fixed spread prices will remain consistent and will not change despite the market going up and down. This can be particularly advantageous when market-driving news hits the headlines unexpectedly. With a fixed spread, you will not see the difference between the bid and ask prices wildly fluctuating, which can make it challenging to plan profitable trades even with proper risk management.
Also, with fixed spread trading, prices can vary depending upon which asset you are trading. Certain assets may tend to have more expensive spread costs than others. Much of this has to do with the liquidity in the markets. Assets that have more people trading them will have more liquidity. This usually means the spread on these assets will be wider resulting in higher trading costs.
For instance, the EUR/USD is known as a major currency pair and is one of the most commonly traded assets in the global financial markets. This is why the spread for this asset tends to be much narrower. However, trading exotic currency pairs, such as the TRY/JPY pair, will have significantly wider spreads. For example, if a broker is offering a spread of 2 pips on the EUR/USD, the spread on the TRY/JPY pair could be around 4 pips.
Fixed Spread vs. Variable Spread
It is important to understand the difference between fixed spreads and variable spreads. In general, the difference between the two has to do with whether or not the listed price on the Forex broker platform is actually the price you will receive when you decide to execute a trade. A fixed spread allows the price listed on the platform to be the actual fill price. This is made possible because the broker can control the price presented to users by pre-purchasing large market positions. Through the trading desk, the broker can sell positions in smaller portions at fixed prices.
In contrast, a variable spread is when the price of the assets will change from what is listed by the broker. The fluctuations are dependent upon the current market conditions which are always changing. Variable spreads are sometimes referred to as “floating” spreads. Fixed spreads are normally offered by brokers operating as market makers, while non-dealing desk brokers are usually the ones offering variable spreads.
Whether a fixed spread or a variable spread is better will depend on different factors. The level of volatility in the market can be a significant factor that should be considered. In more volatile markets, a variable spread will become wider which means increased trading costs. In this situation, fixed spread platforms would be preferable. However, there could be times when volatility is quite low, which could result in variable spreads becoming more narrow than fixed spreads which will not change due to market fluctuations.
Your trading style can also make a difference as to which type of spread is preferable. Short-term traders may find fixed spreads advantageous in order to reduce the negative effects of volatility. For more long-term trading styles, this may not be as much of a factor.
Pros and Cons of Fixed Trading
There are many advantages in choosing to trade with a fixed spread broker as follows:
- One of the benefits is that a fixed spread broker generally has lower capital requirements compared to variable spread platforms which usually require more liquidity to function. Many small retail investors are not able to afford the higher requirements for the capital of variable spread brokers.
- Many traders prefer fixed spread platforms because of the increased transparency. The price you see on the screen is the price your trade will be executed at.
- Also, many times, fixed spread trading can be more cost-efficient, particularly in volatile markets, since during these times variable spreads can offer much wider spreads.
- On the other hand, fast-moving markets can be challenging for fixed spread brokers as well. The platform will not fill your trade at a different price that you have no control of. However, it is possible that during volatile markets, a fixed spread broker may ask you to accept a price that is different than what was originally quoted.