Newbie Question

Discussion in 'Forex' started by axcel, Sep 5, 2005.

  1. axcel



    1. I was wondering why the spread varies even when trading with a single broker ... Of course, people (other than the firm) bid and offer, but can the broker increase/deacrease the spread throughout the day? What is it affected by?

    2. Why do different brokers have different spreads?

    Any replies are greatly appreciated
  2. JackR



    You appear to be new to ET. ET has a very powerful search engine. Look up in the right-hand corner of the screen. Click on search and then do a search in the Currency threads for a list of terms like "Forex", "spread", etc. Suggest you initially limit your search to the Forex forum although if you add the term "IB" (which stands for Interactive Brokers) you might pick up a very long, good thread on IB's entry into the FOREX business.

    A brief answer to your question - Widened spreads in the FOREX area mean more uncertainty because there is less liquidity (fewer buyers and/or sellers), just the same as in the equities markets. Brokers in the FOREX world can trade against their own customers. They set the prices. If you trade is successful the broker stands to lose money on the trade. In other cases they act as true middlemen (brokers) and simply execute your orders against other buyers and or sellers and only make the commission. They never lose because they never take the other side of your trade.

    I'm not a FOREX trader just interested in that market a bit.
  3. different brokers offer different spreads because some of them make more money off your trades than others do.

    their individual spreads may also have to do with the actual rates they themselves get from the banks they deal with.

    at a time of high-volatility spreads can widen significantly - again, this is simply a reflection of what happens in the real Interbank.


  4. Is some situation of possible volatility brokers set wider range of spread, for example, a few minutes before a major announcement is released (like the unemployment rate each first Friday of the month).

    So, some forex brokers try to deal 3 or 4 pips “all the time” no matter what, but, who knows..
  5. axcel


    Thnx, guys