The quest by brokers to capture more forex traders to trade on their platforms has given rise to some brokers going to the extent of offering a zero-spread account to traders to lure them into joining their platforms. While a zero-spread account may have some benefits to the trader yet there are some disadvantages associated with it. This work will therefore help you to understand the meaning of a zero-spread account, the benefits of using it as well as the disadvantages associated with it. You will also find in this work a long list of brokers offering a zero-spread account to assist you in choosing which broker is best for you to trade with.
Meaning of Spreads in forex
Spread is the difference between the bid and ask price of a given pair in the market. It is the price at which the broker offers traders a given financial instrument for trading on their platforms which is usually different from the conventional market price. Often, brokers add extra cost to the market price of a given pair while offering it to traders as their commissions for rendering service. The spread added for trading different pairs varies across different financial instruments. Here we find more spread for major pairs and commodities such as Gold, Silver, Crude oil, etc while there are lower spreads for minor pairs.
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Understanding the bid and ask used in spreads
The Ask price is the price at which the broker offers the pair to the trader when he places a buy order. On the other hand, the Bid price is the price at which the broker sells the financial instrument to the trader when he places a sell order.
Meaning of a Zero spread account
A zero spread account is one with no difference in the bid and ask price. Here, the broker offers the pair to the trader at the institutional prices without adding any extra cost as commission for services rendered. Using a zero-spread account helps the trader to determine their exact entry and exit points.
Benefits of a Zero spread account
- Helps traders to maximize their profits.
- Reduces slippage in pending orders.
- Often brokers offer high leverage for trade with zero-spread accounts.
- Makes it easy for traders to know their entry and exit points.
Disadvantages of using a zero spread account
- Some brokers charge high commissions for their zero-spread account.
- There is usually a minimum amount required for using a zero-spread account which varies according to brokers.
- Not all financial instruments are listed for trading on the zero-spread account.
- Some hidden charges are usually added by some brokers on the zero-spread account.
- The zero-spread account is usually provided by desk dealing brokers who take the opposite position of their client’s trades.
How to create a zero-spread account
The zero spread account is usually found in the list of the multiple account options provided by the broker for trading. To create a zero-spread account, the trader will first need to choose from the list of the brokers that have this zero-spread account on their platform.
Next, he will need to register with this broker and select the “zero-spread account” option as his account type while filling out the registration form. Afterwards, the details of his zero spread account will be sent to him by the broker for trading on their platforms.
List of brokers offering the zero-spread account
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