BRKV - The lowest spread forex brokers are very easy to find. You just go to every broker’s website and check their spreads. After comparing, you can find yourself the forex broker with the lowest spread. But is it really what you’re looking for? You may think it is but it’s not. The thing you want to find is brokers with the lowest trading cost. Spread is not the only thing that decides the trading cost. It’s just one factor among the others like commission, rebate, bonus, deposit...
So how can we find the brokers with the lowest trading cost? You don’t. Luckily, I have done that for you. I have tested with many different popular forex brokers and after a lot of calculation, I’m sure these 5 brokers have the lowest trading cost:
Here are the specific spreads of more common currency pairs:
|Exness||0.5 pip||0.7 pip||0.7 pip||1 pip||0.9 pip||0.6 pip||0.6 pip|
|XM||0.8 pip||1.1 pip||1.1 pip||1.5 pip||1.2 pip||1.1 pip||0.8 pip|
|HotForex||1.2 pip||1.5 pip||1.8 pip||1.9 pip||1.9 pip||1.9 pip||1.7 pip|
|FXTM||0.8 pip||0.5 pip||0.9 pip||1.1 pip||0.6 pip|
|FBS||1.1 pip||0.8 pip||0.9 pip||4 pip||3 pip||7 pip||2 pip|
|Forex.com||1.2 pip||1.2 pip||1.4 pip||3.2 pip||2.3 pip||2 pip||1.2 pip|
|FxPro||1.1 pip||0.7 pip||1.3 pip||0.7 pip||1.3 pip||1 pip||109 pip|
|Pepperstone||1.1 pip||1.1 pip||1.4 pip||1.3 pip||1.2 pip||1.4 pip||1.2 pip|
|Saxo Bank||0.7 pip||0.5 pip||0.8 pip||0.7 pip|
Now, let’s dive into details. Or watch a summary video first:
Of course we all agree that the first condition to choose a broker is their reliability. We only trade with trusted and regulated brokers. Then, the next criteria is the transaction cost.
Spread is the difference between the Bid and the Ask prices. It is the transaction fee you have to pay for brokers or banks. The higher the spread, the higher the transaction cost. That’s why most traders want to trade with tight spread brokers. However, not all traders want to trade with lowest spread brokers. The information below is my own experience. You cannot find anything like this anywhere else. So let’s read all this article to understand all.
There are 2 types of forex account: regular accounts and ECN account. When traders register the regular accounts, the brokers will charge spread as their main income. That’s why their spreads are much higher than that of ECN accounts. When they get quotes from liquidity providers, they will add the transaction fee (spread) to those quotes (a process called Markup). For ECN accounts, they will provide the exact quotes that liquidity providers provided. Therefore, they have to charge commission as it is their main income.
There are 2 types of forex accounts: regular account and ECN account. I cannot review all broker accounts here, because it will be too long. So I will list down 5 forex brokers that have the lowest spread for regular accounts, because the question is about tight spread brokers. It means you want to know about the regular accounts’ spreads. Here are top 5 lowest spread brokers:
From the expert's view, brokers who claim they have the lowest spread are not entirely good. You can find hundreds of brokers online that say they have really low spread, may even be the lowest in the market. However, the truly good ones are like needles in the hay stack. A forex broker can easily adjust their spread to a very low rate, but that will cost them a lot of money. So, they increase other fees (usually hidden and only revealed when a trade is done) such as the trading fee, commission, deposit rate, account openning fee, or monthly service fees. These fees can together add up to such a huge cost that the low spread they advertise is nothing compared to it.
However, like I said, not all low spread brokers are bad. There are some true brokers that have really tight spread but at the same time have really low trading cost. They can be brokers who have operated in this market for a very long time and have enough money to keep things cheap on their platforms. So, the bottom line is the lowest spread brokers are not all good, but they are definitely not bad at all.
There are 2 types of traders: scalpers and long term investors.
Scalpers are traders who open and close many positions within short time. As usual, traders who keep their positions open less than 1 month are scalpers. Vice versa, traders who keep their positions open longer than 1 month are long term investors.
They open many positions in a short time, so their main transaction cost are spread and commission. Moreover, they also earn just some pips per order, so they prefer to choose tight spread and low commission brokers. I have traded like both a scalper and an investor, so I know which brokers suit which type. These are the 3 brokers that I find most suitable for scalpers thanks to their low spread and commission:
Because they keep their positions longer, they earn some hundreds of pips per position. Therefore, they don’t care about spread and commission, because they only pay a maximum of 2% of their profit for spread, but their main transaction cost is swap, because they keep their positions open for months. Sometimes, they have to pay up to 90% of their profit for swap. For this type of traders, they prefer low swap brokers. These are the lowest swap brokers that I find most reliable and safe to trade with:
So what type of trader are you? If you are a long term investor, don’t care about spread. If you are a scalper, spread and commission are important.
US and UK are the 2 biggest forex markets in the world, but their brokers are less competitive in term of transaction cost. I did a research of hundreds of the biggest forex brokers in the world, and I found that US and UK brokers usually offer higher spreads and commission than Australia and CySEC brokers. CySEC brokers offer the tightest spreads. Example: Here are the spreads for EUR/USD of top forex brokers:
|Exness||0.7 Pip (Classic account)
|XM||0.8 Pip (Ultra Low account)
||CySEC, FCA, ASIC|
|HotForex||1.1 Pips (Premium account)
||CySEC, FCA, FSCA|
|FBS||1.1 pips||CySEC, IFSC|
As you can see, the CySEC broker, Exness, has the lowest spread. UK or US brokers like Forex.com have the highest spreads. Their spreads double that of Exness. You can find more about Exness advantages. XM has just rose to second place thanks to its all new Ultra Low account (introduced in December 2018). XM’s Ultra Low account has spread as tight as 0.8 and completely commission-free. Its leverage is upto 1:888 and it has many more amazing features.
Why US and UK brokers have higher spreads?
BRKV - Because of the disadvantages of their regulations. US and UK forex brokers cannot offer high leverage or bonuses, and they have to pay more for the regulation fee. That’s why they have to charge more on spread and commission.
Scalping is a forex trading strategy that targets at very small profits over a very short period of time. Traders who choose this strategy, who are called scalpers, open and close a position very quickly. They make only 3 to 5 pips for each trade. Therefore, they really need low spread brokers. If the spread is too wide, they cannot make any profits.
Hedging is a forex strategy that traders use when they want to play safe. They open two opposite positions so that if one fails, the other will cover the loss and even make some profits. So with this strategy, traders prefer low spreads so that any risk can be contained easier.
Again, only scalpers should choose low spread brokers. If you are long term investors, swap is more important.
But there are dozens of tight spread brokers, so which one is the best for you? Here are the conditions to choose the best low spread brokers:
If you are ASIAN traders, Exness is the best brokers for Scalpers. For Asian traders, check out:
If you are Africa traders, XM is the best.
If you are US traders, Forex.com is the best If you are European traders, XM and Exness are the best.
Here are top 5 lowest spread brokers: