What is Spread in Trading?
In general, spreads mean the difference between two data points. In terms of trading one of the most common definition is, the spread is the difference between the bid price or buying price and the ask price or selling price of an instrument or asset such as index, individual stock or commodity, etc. side for example if the bid price is 0.10 and the ask price is 0.14 then the spread will be of 0.04.
Spreads can never be zero as whenever buying price becomes equal to selling price, a trade will be executed. It also happens due to market conditions; the bid price will always be a little higher than the market price and ask price will be a little lower than the market price, which develops a gap between buying and selling price commonly known as a bid-ask spread or just spread.
CSFX offers tight spreads to all accounts with CSFX. We also provide fixed spread as well as variable spreads. We recognize the fact that low spread helps trade, and we have built our business model around our customers, this is the reason we have attributed great importance to our execution quality.
Fixed spreads and Variable Spreads
While searching for a CFDs broker, one of the essential aspects is how they price their spreads. Most of the brokers generally provides two types of trade spreads: fixed and variable spreads.
Variable spreads are those in which the difference between the bid-ask price of a particular instrument fluctuates in arrange. For example, a variable spread for the EUR/USD pair fluctuates between 1 to 4 pips during the normal market condition, but at times of volatile market conditions, this range can be widened to 7 or even 10 pips.
On the other hand, Fixed spread is defined as those spreads which remains constant or do not change throughout all trading condition are known as fixed spreads. Fixed spreads differ depending on the types of instruments. Most of the brokers provide fixed spread in a range of 1 to 3 pips for a particular instrument.
Traders who trade using fixed spreads pay a small premium during quiet market ours, but it ensures that the spread will not widen even during the most volatile market conditions, unlike in variable spread.
What is a Fractional Forex PIP?
Generally, the forex prices are quoted till 4th decimal places, but some brokers provide forex prices till 5th decimal place, that 5th decimal place digit represents or known as Fractional pip. The fractional pip is also known as “pipettes.” it helps traders with more accurate quoting possible and tighter spreads.
This setting allows you to set Trader Range value that will appear in the New Position and Close Position dialogs instead of “0”. Using Default Trader Range can help you to create faster and send the New and Close position orders.
If fractional pips are applied for some instruments on the platform, Default Trader Range may also be set with decimals. The system automatically rounds Trader Range for instruments, which do not have fractional pips.