The Spread on FXPro.
Introduction
When you trade with FXPro, the spread refers to the difference between the buy (ask) price and the sell (bid) price of a currency pair, commodity, or other tradable asset. It’s how brokers like FXPro generate revenue from each transaction. The spread represents the cost of executing a trade, and it can vary based on several factors, including the type of account, the instrument being traded, and current market conditions.
1. Account Types and Spreads
Standard Accounts:
o Spreads for popular forex pairs like EUR/USD typically start from 1.4 pips.
o The spreads are fixed, meaning they remain consistent, regardless of market fluctuations.
·Raw+ Accounts:
o Variable spreads starting from 0.0 pips.
o These accounts come with a commission per trade, and they’re ideal for traders who prefer the lowest spreads and are comfortable with commission-based pricing.
cTrader Accounts:
o Similar to Raw+ accounts, these offer raw spreads starting from 0.0 pips for pairs like EUR/USD and GBP/USD.
o Like Raw+ accounts, a commission applies to each trade.
Elite Accounts:
o Designed for professional traders or those with larger capital, Elite accounts offer competitive spreads, but the account is typically better suited for experienced traders.
2. What Affects the Spread?
Several factors influence the spread at FXPro:
A. Market Liquidity
Liquidity refers to how easily you can buy or sell an asset. Here's how liquidity affects spreads:
High Liquidity (narrower spreads):
o When a lot of buyers and sellers are trading a specific asset (e.g., EUR/USD), the spread tends to be narrower, as there’s more competition for the same price levels.
Low Liquidity (wider spreads):
o For exotic pairs (like USD/TRY or EUR/SGD) or during off-peak hours, the market can become less liquid, causing the spread to widen.
B. Time of Day
The time you trade can also impact liquidity, and consequently, the spread:
Major Market Hours (London, New York sessions):
o Spreads are typically narrower during these hours as liquidity is high due to active trading.
Off-Hours (weekends or overnight):
o Liquidity decreases, and spreads may widen. This is especially true for exotic pairs or currencies from smaller markets.
C. Market Volatility
During periods of high volatility, like when economic reports or major news events are released, spreads tend to widen:
· News Events or Economic Announcements:
o Events like central bank rate decisions or GDP reports can cause sharp price movements, prompting brokers to widen the spread to mitigate risk.
· Post-Economic Reports:
o After major data is released, brokers may maintain wider spreads until the market stabilizes.
D. Instrument Type
The spread can also vary based on the instrument you’re trading:
· Major Currency Pairs (e.g., EUR/USD, GBP/USD, USD/JPY):
o These pairs tend to have the tightest spreads due to their high liquidity.
· Exotic Currency Pairs (e.g., USD/ZAR, EUR/TRY):
o These pairs typically have wider spreads due to lower liquidity.
· Commodities, Stocks, and Indices:
o Commodities like gold or oil generally have tighter spreads, though they can widen during times of market volatility.
E. Broker Type and Account Type
The type of broker and account you use can impact spreads:
· Market Makers:
o Market makers typically offer wider spreads because they take the other side of your trades and adjust the spread to cover the risk.
·ECN/STP Brokers:
o These brokers offer raw spreads (from 0.0 pips), but they charge a commission. The spread is determined by market conditions and is not marked up.
· Account Type:
o Standard accounts tend to have fixed spreads, which may be higher than those in raw spread accounts that offer variable spreads but charge commissions.
F. Broker’s Pricing Model
FXPro uses different pricing models that influence the spread:
· Fixed Spreads:
o Fixed spreads remain constant, regardless of market conditions, and are usually found in standard accounts.
· Variable Spreads:
o Variable spreads fluctuate based on market conditions, such as liquidity and volatility. These are often found in raw spread accounts and can be tighter in stable markets.
G. Political or Geopolitical Events
Unexpected events such as elections, natural disasters, or geopolitical tensions can affect the spread:
·Political Instability:
o Political or geopolitical issues can cause market volatility, which leads to wider spreads as brokers account for the uncertainty in price movements.
3. Commission-Based Accounts
For accounts with raw spreads (Raw+ and cTrader), FXPro charges a commission per lot traded. For example:
· A typical commission might be around $4.50 per lot (for each side of the trade), depending on the currency pair and account type.
4. Example of Spreads
Here’s an example of the spreads you can expect at FXPro:
· EUR/USD: From 0.0 pips (for Raw accounts, with a commission).
· GBP/USD: From 0.2 pips for standard accounts, or 0.0 pips for raw accounts (with a commission).
· USD/JPY: Similar spreads, starting from 0.0 pips on raw accounts, with a small commission for each side of the trade.
Conclusion
FXPro offers competitive spreads, especially on its raw spread accounts (Raw+ and cTrader). While spreads are generally low, particularly for major currency pairs, commissions are charged on raw spread accounts. Keep in mind that spreads can widen during volatile market conditions, and the type of account you choose will determine the spread levels you encounter. Always consider your trading style and risk tolerance before selecting an account.