Fixed Spread Trading Accounts
Up-to-date brokers of foreign exchange market develop and implement a lot of accounts, with various conditions and principles of operation. Fixed spread accounts represent themselves one of the long established trading options, principles of which are defined as the opportunity for trading without slippage, at a certain price. Initially, many companies provide players with the fixed spread Forex broker accounts for carrying-out the currency transactions on the market, with the order execution at specified price and the use of re-quotes, but no commissions. This old-established and developed trading scheme is still popular and actual among traders.
What is the Forex fixed spread?
When two independent prices come out on the Forex market – buy and sell (Ask price and the Bid respectively), the difference generated between them (spread) – is a volatile quantity, for stabilization of which trader, who uses fixed spread broker account, makes one of these two prices the main one, while the second price is formed artificially, within the limits of previously specified interval.
For example, many Forex fixed spread accounts for EUR/USD determine spread of 2 pips, i.e. the distance between the Ask and Bid price is 2 pips, regardless of the current situation on the foreign exchange market.
The advantages of fixed spread forex brokers
The majority of brokerage firms expose for trading the fixed spread accounts. In order to make sure, user might browse the accounts description of each broker, with a full review of their features and benefits.
The client transactions with the fixed spread are executed at the price established in the order. If during the order processing the price suddenly changes, the trader is provided with the new prices, as well as with confirmation to execute the current operation at the new rates – re-quotes. This way of the order implementation is called Instant Execution.
Thus, when trading with application of the Forex fixed spreads as well as with the use of the Market Execution model, the trader secures himself from slippage and from order execution at the sacrifice price. This is the main reason of never decreasing popularity of this account type among traders, focused on the control and security of their transactions.