We know that the foreign exchange spread is the difference between the dealer buying and selling currency.

Foreign exchange dealers quote a buying price (ask) and a selling price (bid) when quoting. The spread is the difference between the buying price and the selling price. From the perspective of investors, handicap is the cost of the transaction. Of course, the smaller the handicap, the better for investors. Generally speaking, the spreads of currencies with high circulation are less than those with currencies with low circulation.

So, what determines the level of foreign exchange spreads?

When the trading market is active, more buyers and sellers are in the market. As the number of buyers and sellers of a given currency pair increases, competition and demand for business increase, institutions usually narrow their foreign exchange spreads to facilitate transactions between the two parties. If investors do not want to pay too much interest, they can avoid buying and selling currencies with few transactions. When you trade mainstream currency pairs (such as the GBP/USD currency pair), multiple market makers will compete for the trader’s orders to give better buying and selling prices. If you trade a sparsely traded currency pair, there may only be a few market makers to match the transaction. At this time, they will increase the spread to ensure the profit of buying and selling. Investors can choose currencies that are more active in trading, and the cost of spreads is relatively low, and the probability of profit will be higher.

What determines the level of foreign exchange spreads

What is the general foreign exchange spread?

The size of foreign exchange spreads is related to the type of foreign exchange accounts. Foreign exchange accounts are generally divided into two types, namely, a trader account and a non-trader account. Under normal circumstances, the spread of a non-trader account is higher than that of a trader account.

Forex non-trader accounts usually use floating spreads. This foreign exchange spread is not fixed, but will change with the volatility of the foreign exchange market. And the spreads between different currency pairs are also different. Let’s take EUR/USD as an example. Under normal circumstances, the spread between Europe and the United States is about 2 points.

Forex accounts with traders usually use fixed spreads. The spread is fixed, regardless of whether the current trading volume on the foreign exchange market is high or low. Foreign exchange fixed spreads The spreads of each currency pair are also different. Take the Euro/USD as an example. Under normal circumstances, the spreads in Europe and the United States are about 1 point.

Generally speaking, the more active and larger markets offer lower spreads, such as the EUR/USD and GBP/USD spreads, rather than other non-major currencies. What is the spread of foreign exchange speculation? On the other hand, the smaller the market, the smaller the currency liquidity, the greater the spread provided by the dealer, and the difference between the commodity points provided by the dealer is an important factor that affects whether customers choose a dealer.
What is normal for foreign exchange spreads?

What is normal for foreign exchange spreads?

It is normal for foreign exchange non-trader accounts to have a spread of around 2 points in Europe and the United States, and a non-trader account to have around 1 point in Europe and America.

The reason why the spread of the foreign exchange non-dealer account is higher than that of the trader account is that it is a non-gambling platform, and the profit comes entirely from the spread with the transaction, so the spread is generally higher.