Spread and Liquidity offered by Forex Brokers
>> Tuesday, December 30, 2008
Almost all brokers provide a thin spread for the major liquid pairs. Brokers can be seen to offer a spread of 2 to 3 pips for pairs such as the USD/JPY, EUR/USD, and the GBP/USD USD/CHF respectively. These are some of the most liquid pairs a trader generally focuses on.
Also, most forex brokers do not make a commission on every trade a trader makes. Their profit is based on the bid/ask spread calculated in pips. Like previously mentioned day traders try most to catch the small price fluctuations throughout the day. Profit goals here are smaller compared to a swing trader. For a day trader each pip counts.
Traders usually don't rather can’t afford to, trade with larger spreads because that can lead to the consumption of profit to such an extent where the required risk/reward wont be available. Most forex trading takes place with the more liquid pairs.
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