Lower spreads has been one of the top criteria amongst several traders for broker selection. Read how major brokers are changing their spreads and trading costs structures to attract these traders.
In a recent post (which you can see here) I described the 3 steps that helped me achieve a return of return of over 100% in less than 2 weeks.
One very important step besides finding a strategy was the selection of a broker whose offering will actually help you achieve profits.
The spread is one such important factor , especially if you are employing a scalping/high frequency strategy.
Therefore it is a good idea to find a true ECN broker that offers raw ,low spreads with a fixed commission .
In the previous post I had proposed Tickmill ,which is where I was able to achieve this return. However I received a lot of mail that they can’t accept them yet as clients due to insufficient regulation in their region or the trader feeling uncomfortable with an upcoming broker.
Switching to commissions structure for lower spreads
However it appears that more and more brokers have started to shift toward this type of charge model. Very low spreads with a commission rather than a higher spread with no commission.
HotForex a broker that has been in the business for quite a while recently decided to operate a similar model.
Their new Zero -Spread Account Type offers spreads a zero pips with a small commission of 4USD/Lot. This would bring the total spread on EURUSD starting at 0.8 lot allowing scalping/high frequency strategy.
For the USD traders, FXCM that suffered the 225USD Million loss and is currently struggling to recovery negative balances from clients is advertising new lower spread scheme starting at 0.2 pips on EURUSD with a commission of 4USD/Lot (8USD/ Round Lot) .This would bring the total spread to as low as 1.0 pip. This is an attempt to attract more clients.
It is quite interesting to see how long this spread war between the brokers will continue. and how much of their profits they can sacrifice. Provided the brokers offer the same quality of trading services and execution this can only work to our favor as it reduces the trader’s costs.
Will we see negative spreads ? It’s a long shot but who knows. The broker should still make money given the broker also gets the same negative spread and gets the commission.