In forex trading, there are many different account types, each with its own pros and cons. Raw spread forex accounts are one type that has gained popularity among experienced traders who want to have the lowest possible trading costs and the most direct access to the market.
Unlike traditional forex accounts, which may have inflated spreads or hidden commissions, raw spread accounts give you a direct view of the true market prices. This means that it will cost less to trade but not only that, you will also have more control over your trades.
Electronic Communication Networks (ECNs)
Raw spread accounts work by using Electronic Communication Networks (ECNs). ECNs are like stock exchanges for forex trades. They allow traders to connect directly with the market and trade at the best prices available.
They typically have very low spreads as well, which can be as low as 0.0 pips. This is significantly better than the spreads offered by traditional brokers.
In addition to low spreads, raw spread accounts also offer greater liquidity and faster trade execution. This is because they give traders direct access to the market, without any intermediaries.
Forex Spreads: What are They?
Before diving too deep into the topic, traders should know what forex spreads are in the first place. Forex spreads represent the difference between the buying (ask) and selling (bid) prices of a currency pair.
Essentially, it is the cost of the trade, acting as a fundamental component of transaction fees. The spread is measured in pips, with a pip being the smallest price move that a given exchange rate can make based on market convention.
The nature of forex spreads is linked to market dynamics. Spreads can be broadly categorized into fixed and variable spreads. Fixed spreads remain constant under normal market conditions, providing predictability for traders.
On the other hand, variable spreads fluctuate based on market volatility, expanding during periods of high volatility and contracting during calmer market conditions.
Raw Spread vs. Marked-Up Spread
The concept of raw spread is pivotal in understanding how brokers structure their pricing models. A raw spread is the direct, unaltered spread offered by the interbank market.
In contrast, marked-up spreads involve brokers adding a margin or commission to the raw spread. Raw spread forex accounts eliminate this additional layer, providing traders with a direct link to the market and, consequently, more favorable trading conditions.
Understanding Raw Spread Forex Accounts
Now that forex spreads are well defined, a raw spread forex account is a specialized trading account that establishes a direct connection between the trader and the market.
Unlike traditional accounts, raw spread accounts eliminate marked-up spreads or commissions, providing traders with the opportunity to benefit from lower costs per trade. Typically offered by brokers employing Electronic Communication Network (ECN) technology, raw spread accounts offer a direct link to the market, allowing traders access to the full depth of the market.
ECN technology, short for Electronic Communication Network, is a sophisticated form of trading that enables traders to interact directly with the market without intermediaries.
Brokers employing ECN technology, such as those offering raw spread accounts, provide access to the best trading conditions and the lowest possible spreads, ultimately allowing traders to secure the best prices on their trades.
Advantages of Raw Spread Forex Accounts
One of the key advantages of raw spread accounts is the transparency they offer. With fewer hidden fees and costs associated with trading, traders can enjoy better visibility into their transactions. The elimination of marked-up spreads or commissions results in tighter spreads compared to standard accounts, enhancing the chances of success in trades.
Traders utilizing raw spread forex accounts also benefit from faster execution times. The efficient nature of ECN technology ensures that orders are executed swiftly, providing traders with greater control over their transactions.
Reduced fees and faster execution times make raw spread forex accounts an ideal platform for experienced traders seeking to maximize profits through active trading strategies.
In a raw spread forex account, the spread for a commonly traded currency pair like EURUSD typically starts from an impressively low 0.1-0.2 pips. While spreads may vary for other currency pairs, the consistently low spreads on major pairs contribute to the appeal of raw spread accounts among traders.
Top Raw Spread Forex Brokers
In exploring the top raw spread forex brokers, we delve into three industry leaders: Exness, IC Markets, and FP Markets. These brokers have not only stood the test of time but have also garnered recognition for their commitment to transparency, reliability, and providing traders with optimal conditions for raw spread forex trading.
Founded in 2008, Exness has established itself as a prominent player in the forex market. Regulated by CySEC, FCA, and FSA, Exness offers a monthly trading turnover of $325.8 billion USD. With an extensive range of trading instruments, including cryptocurrency CFDs, stocks, and over 120 currency pairs, Exness provides favorable working conditions, low commissions, and instant order execution.
Next, operating since 2007 in Sydney, Australia, IC Markets holds licenses from AFSL and ASIC. As a member of AFCA, IC Markets adheres to industry standards and undergoes regular audits. Traders benefit from competitive spreads, super-fast order execution, and a wide array of trading instruments, making IC Markets a preferred choice for raw spread forex trading.
Lastly, FP Markets has offered traders access to over 10,000 trading instruments since 2005. Regulated by ASIC and CySEC, FP Markets is known for its favorable trading conditions, rapid order execution, and low spreads. The company’s commitment to transparency and reliability is evident through its regulatory oversight and commitment to customer satisfaction.
Given that, Exness, IC Markets, and FP Markets have earned their stripes as top raw spread forex brokers, offering not only low spreads and rapid order execution but also a commitment to transparency and regulatory compliance.
In a nutshell, forex trading has become more complex, making raw spread forex accounts increasingly important. These accounts provide more transparent pricing, narrower spreads, and faster execution, giving traders a better chance of success.
Reputed brokers like Exness, IC Markets, and FP Markets offer top-notch raw spread forex accounts that can help traders take advantage of the ever-changing market.
In 2023 and beyond, embracing raw spread accounts is very important for traders who want to succeed in forex trading.
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