- What exactly is the “spread” that you often hear in online forex trading?
- Spreads have a lot to do with profits and losses, so you need to know.
- In this article, I will explain FX spreads in an easy-to-understand manner.
- I will also explain the recommended Forex companies from the perspective of spreads, so please refer to it. Spread is a fee incurred due to the difference in rates in Forex trading.
- The smaller the spread, which is the transaction fee, the lower the cost.
- Trading with GMO Click Securities is recommended to minimize spreads .
- With the industry’s lowest spreads, the more you trade, the better.
- Also, you can do demo transactions for free from your computer or smartphone, so please give it a try.
What is FX spread?
- Spread is one of the fees incurred in online forex trading, but how is it specifically incurred?
- I will explain in detail about Forex spreads.
- The spread is the difference between the selling price (Bid) applied when selling a currency pair in Forex trading and the buying price (Ask) generated when buying.
- If the difference is small, then the spread is narrow, indicating that the transaction incurs less fees.
How spreads work
- I will explain the mechanism of spreads using specific numerical values.
- Suppose you traded a USD / JPY currency pair and the numbers are as follows:
- ・ [Selling price] 106.872
- ・ [Bid price] 106.875
- In this case, 106.875 (Bid price) -106.872 (Sell price) = 0.3 sen .
- “0.3 sen” is the spread that occurs at the time of trading and is the commission borne by the trader.
- This is referred to as “spread 0.3 sen”.
Differences between currency pairs
- It’s important to understand that spreads can vary from currency pair to currency pair.
- The reason for this is that the amount of currency in circulation makes a difference in procurement costs.
- When conducting online Forex trading, be sure to check the spread for each currency at the Forex company you are trading.
- Forex4money has the industry’s smallest spread and is fixed in principle, so you can trade with confidence.
- In addition, you can make profitable transactions with high interest rate swaps, and you can make crisp transactions with high-performance trading tools.
How to calculate FX spread
- Forex spreads are generated according to transactions such as 0.2 sen and 1.0 sen, but how do you calculate them?
- I will explain how to calculate the spread that occurs in Forex trading using specific numerical values.
- The method of calculating the FX spread is very simple.
- It can be calculated by multiplying the spread at the time of trading by the number of currencies traded.
- Suppose the spread is “0.2 sen” when you trade a currency pair of USD / JPY.
- [Number of transactions is 1,000 currencies] 0.2 sen x 1,000 currencies = 200 sen = 2 yen
- [Number of transactions is 10,000 currencies] 0.2 sen x 10,000 currencies = 2,000 sen = 20 yen
- Many people think, “If it’s only 20 yen, you don’t have to worry about it.”
- However, as the number of transactions increases, it cannot be overlooked.
- forex4money , spreads are at the lowest level in the industry, so you can rest assured that the number of transactions will increase.
In addition, you can trade with high interest rate swaps at a great price, and you have high-performance tools.
We are holding cashback benefits, so let’s take this opportunity to start online Forex trading.
What is “fixed principle” of FX spread?
- Have you ever seen the word “fixed principle” in Forex spreads?
- I’m wondering, “What does fixed principle mean?”
- The “fixed principle” of Forex spreads is basically a spread that does not fluctuate.
- Originally, the spread fluctuates according to the fluctuation of the rate, but in the case of “fixed spread in principle”, the spread is constant because the Forex company takes the risk of fluctuation.
- Nowadays, it is mainstream because many Forex companies adopt “fixed principle”.
- The platform which uses fixed spreads in principle , it is possible to trade at high interest rate swaps in addition to the industry’s smallest spreads.
- High-performance trading tools are compatible with PCs and smartphones, so you can choose the one that suits your style.
Let’s take this opportunity to open an account and start trading.
Forex spread fluctuation factors
- Many people may be wondering, “Is it possible for a fixed spread to fluctuate in principle?”
- In principle, fixed spreads do not fluctuate basically.
- However, the following situations may change.
Spread fluctuation factors
- Natural disasters such as the earthquake
- Announcement of results of important economic indicators such as US employment statistics and announcement of policy interest rates
- Closed days in domestic and foreign financial markets
In such cases, it is safe to refrain from trading.
- F4M uses fixed spreads in principle, and in addition to the industry’s smallest spreads, it is possible to trade at high interest rate swaps at a reasonable price.
- It is also recommended for those who are new to Forex because you can experience Forex for free in demo trading and know the trading rules in detail.
- If you are going to open an account, please try opening it with us
What is a spread unit?
- There are two types of spread units: “sen” and “pips”.
- What is the difference between them? I will explain briefly.
- “Qian” is used when one of the currency pairs is Japanese Yen.
- Since the pair to be traded is “foreign currency / Japanese yen”, the use of “sen” is used to distinguish it from transactions between foreign currencies.
- In the following example.
- Example of using money
- US dollar / yen (USD / JPY)
- Euro / Yen (EUR / JPY)
- Pound Sterling / (GBP / JPY)
- Pips is used for currency pairs that do not include Japanese Yen.
- The common rate unit for pairs with and without Japanese yen is “pips”.
- Therefore, transactions that do not include Japanese Yen are distinguished from transactions that include Japanese Yen by using “pips”.
- In the following example.
- Example of using pips
- NZ Dollar / US Dollar (NZD / USD)
- USD / CHF
- British Pound / Australian Dollar (GBP / AUD)
There are two points when choosing a Forex company by spread.
“Spread narrowness” and “spread type”.
By choosing a Forex company with two points in mind, you can trade with less risk.
Let’s take a look.
Narrow spreads are important for risk-reduced trading.
For small transactions, the effect of spreads is small, but for large transactions, the effect cannot be overlooked.
If you are considering a large deal, you should pay attention to the narrow spreads.
When choosing a Forex company, it is a good idea to choose a company with a narrow spread.
- There are two types of FX spreads, “variable spreads” and “fixed spreads in principle” .
- Both spreads fluctuate according to the rate, but the “fixed spread in principle” is a fixed spread because the Forex company takes the risk of fluctuation.
- Forex4money, which uses fixed spreads in principle , has the lowest spreads in the industry.
- Services such as free demo trading and high-performance trading tools are also substantial, so it is recommended for those who want to trade forex with confidence.
- In addition, we are holding a cashback benefit that you can get up to 300,000 yen by opening an account and trading.
- Let’s take this opportunity to open an account and start trading.