What are Trading Spreads & How It Works?

Description: The difference in price between the bid price and the asking price is called the forex trading spread. FairMarkets's bid price indicates the price at which you can sell, and FairMarkets's asking price indicates the price at which you can buy. 

Introduction to Trading Option Spreads

Before answering the question of what forex spreads are, we need to have a basic knowledge of Forex. Foreign Exchange (FX) is the most liquid financial market in the world, where the relative values ​​of country currencies are bought and sold globally. USD, EUR, GBP, AUD, CAD, CHF, and JPY are major currencies. In exchange rates, the first-rate is the base rate, and the second rate is the counter rate. While the base exchange rate is taken into account for buying and selling transactions, the profit/loss calculation is made over the counter exchange rate. When you buy a currency in the Forex market, you take a "long" position in that base currency, and when you sell a currency, you take a "short" position in that base currency. To close your current position, it will be sufficient to take an equal and opposite position in the same currency pair. For example, when you buy EUR/USD at 1.22 with the expectation that the EUR will appreciate against the USD, you buy 1 EUR (long position) and simultaneously sell 1.22 USD (short position). To close this transaction, you need to sell the same amount in EUR/USD. So, Forex has many advantages. To summarize briefly:

• High volume, daily buying and selling transactions,
• All these processes are carried out quickly and easily,
• Investors can invest whenever they want (24 hours, five days a week),
• Investing in a wide range of investment instruments,
• It has benefits such as allowing small investors to invest as well.
• Earn with commodity spreads trading.

Forex trading spread is the difference between the buying and selling prices of financial assets and securities. Although it also represents the difference between the buying and selling prices of assets such as stocks, indices, commodities, options, and futures contracts, it is based on the difference between the buying and selling prices of the parties. In the forex market, which is increasingly popular among all investment types, investors can raise their small investments using leverage and generate income with the right choices. However, it should not be forgotten that the forex market, which offers leveraged investment opportunities, can also lead to financial losses in case of a wrong investment. Forex, which is a correct alternative investment method in terms of evaluating savings, allows all investors to perform transactions at the same prices, regardless of where they are from in the world. The biggest difference between the Forex market from markets such as the stock market is that it can be traded in two directions. E.g., In order for the investor to make a profit in the stock market, he must first make a purchase of that product. In Forex, you can both buy and sell the product you want with your collateral. Thus, you can profit from the appreciation or depreciation of a product. This is where the importance of forex spreads comes into play. This is where you will profit.

Advanced Commodity Spread Trading

Forex is an attractive market with many advantages, but if you are new to Forex, it is possible to gain experience without losing. For this, you can open a free trial account (demo account) from FairMarkets. The FairMarkets demo account has a virtual balance, but the prices of the products are real, and you can get experience by trading here for a while. FairMarkets's demo account is very useful for the investor to get to know more about advanced commodity spread trading. It allows you to see the risks and gains clearly.

Best Forex Broker with Low Spreads: FairMarkets

As FairMarkets, we offer our investors two different account types, variable and fixed trading spreads. This gives traders flexibility in choosing the type of account that suits their strategy. In other words, the live Forex spreads and best CFD spreads show how far the market has to travel in the direction of your transaction in order for the position to become profitable. To explain with an example, Let's assume that the buying price is 1.0984 and the selling price is 1.0983 in EUR/USD parity. In this example, the spread is one pip. Well, When you open a buy or sell a position in EUR/USD, the market needs to move one pip in favor of the position for you to make a profit. Therefore, when the position is opened, investors start trading with a loss of trading spreads size.