Lowest Spread Forex Brokers

Lowest Spread Forex Brokers

Lowest Spread Forex Broker Comparison 2021

Forex traders are on an endless quest to find the forex broker with the lowest spreads possible. Forex spreads are undeniably a huge factor when trading. They are a cost that can cut into your profits. The more actively you trade, the more significant spreads become.

Many brokers understand the importance of providing tight spreads to traders, especially those with short term trading strategies, such as scalpers. In this article, we assess the situation of spreads and offer the lowest spread forex broker comparison to help traders increase profit by lowering their cost.

Lowest Spread Forex Brokers List

Below you will find a list of the lowest spread forex brokers in the world. All spreads below are represented in Pips. Courtesy of Myfxbook.

 EUR/USDGBP/USDUSD/JPYUSD/CADEUR/AUDNZD/USDUSD/CHF
AAAFx0.30.60.50.70.80.60.5
Admiral Markets00.60.41.42.10.60.9
Advanced Markets0.30.40.40.61.10.80.6
Alpari0.20.30.30.81.80.90.5
Darwinex0.30.30.40.71.30.90.6
Destek Markets1.72.322.33.24.13
EXNESS11.51.12.22.321.5
EXNESS44.67.80.84.50.62.9
FIBO Group (Cyprus)1.14.51.72.34.22.82.2
Finotec0.70.60.70.91.30.80.6
Forex4you23231543
Forex4you0.10.40.20.60.90.50.5
FXCM0.10.40.30.60.60.40.3
FXDD0.30.70.410.90.80.8
FXGlobe1.81.81.83.84.44.43.3
FXOpen Markets Limited0.30.80.20.61.70.60.6
FXOpen Markets Limited1.31.81.31.73.421.6
FXPIG0.20.70.10.71.70.30.5
FXPRIMUS0.51.30.61.31.81.61.1
FXTRADING.com33.13.13.23.53.23.1
GBE brokers11.81.81.62.81.91.3
GKFX1.93.42.23.58.42.84.2
GKFX0.41.20.811.710.8
Hantec Markets22.322.22.52.23.5
InterTrader0.30.80.30.61.90.60.7
IronFX Global0.50.80.60.81.20.80.6
JFD0.61.50.60.91.410.8
Lirunex1.21.91.11.51.82.34.3
LMAX0.10.70.20.51.80.50.6
London Capital Group0.80.7124.93.31.8
MARKETS.COM0.71.50.91.632.31.7
One Trade0.31.40.80.91.60.81.4
Renesource Capital0.30.30.30.61.10.50.6
RoboForex0.610.40.710.80.6
RoboForex0.610.40.70.90.80.6
Swissquote Ltd1.62.21.733.42.72.3
Synergy FX121.23.73.61.91.8
ThinkMarkets1.31.81.41.62.51.81.7
Tradealot0.81.30.81.41.81.41.6
Windsor Brokers1.432.33.882.81.4

Information from https://www.myfxbook.com/forex-broker-spreads

Why are spreads important?

The spread is the difference between the bid and ask prices quoted for a currency pair. When you enter a long position, the order is opened using the ask price, which is the higher of the two quotes. To close a long position, a sell order is placed to offset the long position. Therefore, the bid price is used, which is the lower of the two quotes.[1]

Because of how spreads work, you’re essentially always buying at a higher price than what you will sell for and vice versa.

Consider the following example,

  • The price of EUR/USD is 1.18950/1.18975, meaning the spread is 2.5 pips.
  • You buy (long) 10,000 EUR/USD for 1.18975; it has cost you 11,897.50 USD to buy 10,000 EUR.
  • The price does not change, and you immediately close the position and sell 10,000 EUR at 1.18950, meaning 11,895.00 USD is settled in your trading account, representing a loss of 2.50 USD despite the prices not moving.

Who sets forex spreads?

At the root of the forex market are the largest market-making banks in the world, such as Barclays, Deutsche Bank, Citigroup, UBS and many others. Tier-1 banks are the lynchpin of the forex market and determine liquidity and price reference points.[2]

These companies are trading multi-billion-dollar positions on a daily basis and are the primary drivers of the average daily US$6.6 trillion turnover.

If you’ve been comparing the forex spreads at different brokers, you probably noticed they differ significantly. The reason for that is forex is a decentralized market, and not all brokers get their price feeds from the same source. Some brokers may use forex liquidity aggregation platforms to aggregate multiple sources to discover the best bid and ask prices, and access deeper liquidity.[3]

Another important factor is how much the broker marks up the prices you see.

Why spreads vary for different instruments

Various factors determine spreads. The primary factor is liquidity. EUR/USD was the most traded currency pair in 2019 and 2016, accounting for 24% and 23.1% of all foreign exchange transactions in those years.[4]

The more participants trading a particular product increases the market competition, with many banks, financial institutions, corporations and traders outbidding each other and making the prices far more competitive. Less active markets, such as USD/CZK, experience far larger spreads. For instance, according to the Myfxbook forex broker spread comparison tool, during the London session on Friday the 19th of March 2021, the average spread for USD/CZK on IC Markets was 54.1 pips, whereas, for EUR/USD, it was 0.0.

As the pip value of 1 lot of USD/CZK is 100 CZK, that means the approximate cost to trade this pair would 5,410 CZK (US$245) per lot, whereas the cost to trade 1 lot of EUR/USD, where the pip value is US$10, would cost only the commissions.

Spreads vary significantly depending on the time of the day or time of the week. What time of the day would you expect people would trade Japanese yen, Polish zloty and Canadian dollars the most? JPY would be most active during the Asian session, PLN would be most active in the European session, and CAD would be most active during the US session.[5]

Conclusion

Finding a broker with the lowest spreads is a challenge. Many forex brokers make bold statements on their homepages to draw attention to their ultra-low, tightest spreads ever on EUR/USD. But what if you don’t trade EUR/USD? Brokers tend to be highly competitive on a handful of trading pairs but offer far less compelling conditions on other pairs. To add another dimension to the conundrum, some brokers can be more or less compelling at certain times of the day.

Unfortunately, a lot of work is involved in finding the lowest spread forex broker, and that’s not the only factor that should concern you. Consider other fees, such as commissions, swaps, and deposit & withdrawal fees. It all adds up and eats into your profit.

[1] https://www.thebalance.com/what-is-a-forex-spread-1344973

[2] https://www.bis.org/publ/cgfs52.pdf

[3] https://seekingalpha.com/instablog/846513-propelgrowth/1312481-5-reasons-fx-liquidity-aggregation-is-so-challenging

[4] https://www.bis.org/statistics/rpfx19_fx.pdf#page=7

[5] https://www.investopedia.com/articles/forex/08/forex-trading-schedule-trading-times.asp