Tight Forex Spread Difference in UAE

Tight Forex Spread Difference in UAE

In online forex trading, spread difference or simple spread is regarded as the 'cost of trading'. It is the difference in between ask and bid prices for a currency pair. In global forex market, there are no broker or market maker commissions or fees; the spread difference is the benefit that they receive for offering order executions for retail traders.

Over the years the foreign exchange trading spread difference has been constantly narrowed. Before 8 or 10 years the tightest spread available for trading most liquid currency pairs like EUR/USD was 5 (or 5 pips apart). But now the tightest spread can be just 1.5 to 2 pips. This has resulted in huge reduction in the cost of trading and more profit for retail traders. For example the cost of trading a standard lot of EUR/USD will be $50 if the spread difference is 5 pips but will be only $20 if the spread difference is 2 pips. Also profiting from FX trading would have require high price swings of 6 or more pips some years ago but now the trader can profit from just 3 or more pip price change. The increase in trading volume, in the number of retail traders and increasing broker competition are the main factors of this ever-tightening spreads.

Now there are brokerage firms offering fixed spreads, variable spreads and combination of them. Fixed spread means pre-determined spread difference for every currency pair. Variable spreads involve tightest spread difference when the market is liquid and widest spreads when the market is less liquid.

This Article is written for Orient Financial Brokers a leading online forex broker in UAE offering tightest forex trading spreads in Dubai.