What is the Foreign Exchange spread? The foreign exchange spread is essentially the difference between the buying price and the selling price.
Because traders tend to trade one currency for another, foreign exchange currencies are often quoted against the current price compared to another currency.
For convenience, write these currencies in pairs, such as euro/dollar (euro/dollar – where the euro is the “base currency” and the dollar is called the “relative currency”).
To put it more bluntly, a currency spread is the difference between the bid price and the offer price.
The foreign exchange market is an over-the-counter market with no exchange.
In this market, it is the banks that keep offering.
They’re going to collect money and they’re going to sell money.
The difference between the buying price and the selling price is their return;
That’s the basic logic of point spread.
Every time we trade, we have to pay the cost of the difference;
Our position is always negative on opening;
That’s our transaction cost.
Someone will ask about the handling fee.
Fees are another form of transaction cost, and most platforms now have no fees and only spreads.
To put it bluntly, a foreign exchange spread is equivalent to a commission. In essence, a foreign exchange spread is the difference between the buying price and the selling price.
Generally, when doing foreign exchange trading, there will be a spread, and these spreads are the profit of foreign exchange dealers.
There are two kinds of foreign exchange point difference, namely fixed point difference and floating point difference, but floating point difference is more in the market.
As for floating spread, foreign exchange spread is affected by various factors, such as market demand for a certain currency, money supply and money liquidity. Generally, the larger and more active the market is, the lower the spread will be.
The larger the spread, the higher the seller’s price and the lower the buyer’s price. Therefore, the more you will pay when you buy, the less you will get when you sell, thus making it difficult to make a profit.
In addition, in the market, there are some companies will provide floating point spread.
The spread has a serious impact on the returns of investors’ trading strategies. Traders themselves are very willing to buy low and sell high, but the spread of the high means to buy high and sell low, so traders’ profits will be relatively low.
What is the foreign exchange spread?
The foreign exchange price is quoted by the liquidity bank, which will quote two prices at the same time: the bid price and the offer price. The difference between the two prices is the transaction cost, or the spread.
How do you calculate the foreign exchange spread?
For example, the EURUSD buying price is 1.2256 and the selling price is 1.2253, so the difference is 3 points, and the profit made by the forex dealer is 3 points. Of course, the spread of the forex varieties and the platform are different.
Third, why choose the platform with low point spread?
Two days ago, a friend asked me to open an account. She used a Hong Kong platform before.
She said: Before she traded sterling, the spread of 10 hands was $500. Now the spread of 10 hands is $200.
Regardless of profit or loss, the net worth of the account will be $300 more, so that’s the cost savings.
Everyone’s money is not a strong wind, especially the amount of capital is relatively low, trading and more frequent people, more suitable for low point differential platform.
Four, why can’t blindly choose low point spread trading platform?
As mentioned above, point spreads are a source of profit for a platform.
Operating a platform requires staff, promotion, office space, foreign exchange regulatory license, MT4 costs, setting up servers and so on, all of which come from the point difference.
Every industry has its own profit margin. If the spread of a platform is too low to be normal in the industry, the platform is bound to have problems.
So don’t neglect the security of the platform by pursuing the low differential too much.
V. What is the difference between the foreign exchange spread and the handling fee?
1. Foreign exchange spread In the trading of foreign exchange, there are two kinds of foreign exchange price, one is the buying price and the other is the selling price. There must be a certain difference between the buying price and the selling price, and this difference is the “spread”.
The foreign exchange spread is usually shown in the foreign exchange quotation. Investors will find that there are two prices when they place an order in foreign exchange.
When making orders, there must be a slight loss at the beginning of the position. In fact, this is the foreign exchange spread. Once the investor makes a position, the foreign exchange spread will be deducted immediately.
The reason why the cost of foreign exchange transaction is very low is that the only cost to be paid in foreign exchange transaction is that the point difference of foreign exchange is not very large on each platform, so for those investors in foreign exchange transaction, the cost of foreign exchange transaction is very low. 2. Commission Commission, also known as commission, is usually displayed at the terminal and is mainly charged by your agent.
Therefore, if the investor is in the agent to open an account to do a single, must pay attention to whether the agent is charged a commission.
Most agents will not add foreign exchange commission, investors should pay more attention to.
3. The difference between the two is displayed in the quotation, which is mainly charged by the trading platform, and the commission fee is displayed in the terminal, which is mainly charged by the agent.
The above is the difference between the foreign exchange spread and the commission, in the choice of trading platform, we must pay more attention to, most of the trading platform is not charged trading commission, their profits mainly come from the “point spread”, and some agents are charged commission is the commission, understand the foreign exchange spread and commission, to avoid unnecessary losses.
