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Library / Forex trading at Exness / Fixed forex spreads

Fixed forex spreads

Since November 2014, in order to accommodate clients' wishes, Exness has offered the ability to trade instruments with fixed spreads. You can learn more about choosing the type of spread for your trading strategy by reading this article.

Trading instruments with fixed spreads has certain advantages, such as a predictable spread size in a changing market situation as well as simpler trading advisor configuration. However, these instruments have their own special features. You must be familiar with them and accept the Rules and Conditions before you start trading.

You must certainly keep in mind that on the real interbank market the spread is not constant, because the price formation process (i.e. the determination of Ask and Bid prices for each financial instrument) depends on the law of supply and demand. It is impossible for requests to buy and sell to match such that the spread size stays the same.

However, considering the popularity of fixed spreads among clients in retail forex, today many brokers offer the ability to trade the aforementioned financial instruments. To do so, forex companies must continuously hold the spread at a specific level, even if it expands.

A fixed spread includes the market spread plus the broker's commission, i.e. the markup plus "compensation". "Compensation" means a kind of insurance for the forex broker and the trader, which the trader pays for holding the price constant while the market spread fluctuates. Such "compensation" is not included in floating spreads.

If the market situation changes abruptly, which is usually accompanied by a drop in liquidity, the market spread generally expands many times over. If this happens brokers must reduce the actual spread, holding it within the established "corridor". Of course, it is not always possible to guarantee instant order execution in these circumstances. Therefore, orders for fixed-spread instruments are executed using Market Execution.

As we mentioned previously, fixed spreads can be used profitably in a highly volatile market, especially by professional traders with a lot of trading experience, who possess the skills to perfectly predict market behavior.

Some expert advisors developed for MetaTrader 4 are highly sensitive to spreads and are either only recommended for trading with fixed spreads or their settings require you to determine the spread in advance, which is difficult to do for instruments with floating spreads.

To summarize, we note that at Exness traders have a choice — you can trade instruments with fixed as well as floating spreads. Each client can choose the option most appropriate for his or her trading strategy, including trading both kinds of instruments simultaneously. This allows traders to use Exness' conditions successfully to realize their professional potential.

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