Who is The Best Forex Fixed Spread Broker?

Over the past 4 years I have traded foreign exchange with quite a few brokers both in Australia and overseas, during this time I've experienced the best and worst of the forex markets as well as the best and worst of forex brokers in general. I've traded with market makers, fixed spread providers and on electronic communication networks (ECN's). Regularly I get asked which type of forex broker type is the best. To answer this query and share my experiences I decided to write this short article on each kind of forex broker model.

Fixed Spread Brokers
There are quite a variety fixed spread forex providers in Australia, a few have spreads as low as 2 pips on the EUR/USD. Trading on a fixed spread can have its advantages along with disadvantages. Certainly one of the principle advantages of trading on a fixed spread is that investors are guaranteed consistent spreads during times of market instability including interest rate announcements. Volatile times are often the periods throughout which spreads can enlarge allot without notice often catching newbie traders off guard.

Despite having the benefit of a set spread during market instability, fixed spread brokers will often quote wider spreads during quiet periods, frequently their spreads are much wider than those obtainable by market markers or ECN foreign exchange providers.

Buying and selling on a set spread can often be good for newbie traders who're not yet accustomed to the wild price volatility of the forex market.

Market Makers
There are a couple of market markers who have given the rest a bad name by trading against their clients and profiting from customer losses, however this is not everyday practice for all market makers only a select few. In the main market makers are able to offer fairly tight spreads across all the main foreign exchange pairs, however one must always understand that this not always true if you are looking to buy and sell sizeable parcels or trade around announcements such as interest rates or non-farm payroll.

A few market makers are known to widen their spreads by as much as fifty points during times of market volatility, they often do this to protect themselves from scalpers seeking to take advantage of their tight spreads.

When selecting a forex broker who is a market maker you will have to to make certain that you do your homework and make sure that they are not one of the few that are in fact trading in opposition to you and profiting from your losses.

ECN Providers
By far the most transparent foreign exchange broker model is an electronic communications network or ECN. An ECN provider simply aggregates the very best price feeds from a variety of investment banks and always shows the best bid or offer. Nearly all ECN providers will charge a brokerage as opposed to applying a spread to the natural market price this ensures that you are trading on the genuine market price as set by the world's leading investment banks.

There's lots of advantages of buying and selling with an ECN broker probably the most obvious being the spreads available; often there is no spread or an inverted spread, these are prices not attainable from market markers or fixed spread brokers. During volatile times an ECN forex broker will always show the very best price obtainable, as ECN brokers depend on numerous investment banks who're actively trading over these times you'll at all times get the best price and not be subject to extremely wide spreads which you'd otherwise get with a market maker.

Naturally it's up to you to decide on type of forex broker that suits you best as each have their very own unique advantages. You should make your decision based on the buying and selling strategy that you employ and your degree of knowledge of the market. My personal preference is to trade with an ECN forex broker like IC Markets as I can be assured to receive the best pricing {available|obtainable|accessible.

Article Source: http://www.newsarticlessite.com

John Benson is an veteran forex trader having dealt with all the major forex providers in Australia. John has published a many of books and articles on forex trading, it is recommended that you read some of John's publications to make certain that you make the right choice when choosing a forex broker.

Please Rate this Article

5 out of 54 out of 53 out of 52 out of 51 out of 5 

Not yet Rated