How To Avoid Spread In Forex
In Forex trading, the spread is the difference between the bid price (what buyers pay) and the ask price (what sellers get). You can’t avoid spreads entirely—it’s how brokers make money—but you can minimize or manage them effectively.
🔍 1. Choose a Low-Spread Broker
- Look for ECN or STP brokers, which offer tighter spreads and more transparent pricing.
- Compare spreads on major pairs (like EUR/USD or GBP/USD)—they usually have the lowest spreads.
📊 2. Trade Major Currency Pairs
- Stick to high-liquidity pairs like:
- EUR/USD
- USD/JPY
- GBP/USD
- AUD/USD
- These typically have smaller spreads than exotic or cross pairs.
⏰ 3. Trade During High Liquidity Hours
- Best times: When London and New York sessions overlap (around 8 AM – 12 PM EST).
- Avoid trading during:
- Weekends
- Late night hours
- Holidays or major news releases (spreads often widen)
💼 4. Use a Raw Spread Account (If Available)
- Some brokers offer “raw” or “zero spread” accounts, charging a fixed commission instead.
- These can be more cost-effective for high-volume traders.
📉 5. Avoid High-Volatility Events (Unless You’re Prepared)
- During major economic news (e.g., NFP, interest rate announcements), spreads can spike.
- Avoid trading just before or after news events, unless you’re experienced and managing risk tightly.
🔄 6. Use Limit Orders Instead of Market Orders
- Market orders execute immediately at the best available price—you “pay” the spread.
- Limit orders let you enter or exit at your desired price, helping avoid unfavorable spreads.
📈 7. Monitor Spread Charts or Indicators
- Some platforms (like MetaTrader) offer spread indicators.
- Use them to track real-time spread changes and avoid trading when spreads are wide.
📑 8. Read the Fine Print
- Some brokers advertise “low spreads” but apply conditions:
- High minimum deposits
- Spread widening during certain hours
- Hidden commission costs
📌 Summary: To Minimize Spread Costs
| Strategy | Impact on Spread |
|---|---|
| Choose major currency pairs | Lower spreads |
| Trade during peak market hours | Tighter spreads |
| Use ECN/STP brokers | More competitive pricing |
| Avoid market orders | Avoid paying full spread |
| Use limit orders & raw accounts | More control, lower cost |