There are brokers who make profits by seeking commission per trade, while there are few who’ll charge the spread between the bid and ask price.
Well, I simply find out whether the spreads are fixed or variables before selecting a broker. Like I went ahead with XM. IG and fxview because they provide pure ECN spreads starting from 0.0 pips. Anyone know any other brokers with the same spread and pips?
I suppose it’s the stock’s price that influences the spread. If the price is low, the bid ask spread will be larger and vice versa. Purely because of the liquidity reasons.
Firstly spreads widen and contract continuously. I was watching USD/JPY pre-US open the other day: in 1 minutes it ranged between 0.6 pips to 1.2 pips and every price in between. This sort of limited spread move probably reflects the company's total exposure to risk on this pair as their clients move into and out of positions, set and adjust and cancel orders and as the cost of hedging varies. Secondly spreads widen out at known times per day when market volatility will make risk harder to quantify - from some time before the market open until activity resolves itself into a visible direction and volatility reduces. These spread moves are large but reasonably predictable. Thirdly spreads widen around scheduled and unexpected news announcements until the broker can see which way the market is going to go in reaction. These spread moves can be huge - watch your own broker's quotes to see how huge.
Firstly the prices are consolidated that makes the trading very seamless. Second, these accounts come with low spreads even during high volatility. I guess these are good enough reasons for preferring these.
I recommend trading with FP Markets because they offer some of the best trading conditions compared to other brokers and their spreads are consistent even during high market movements.