Spread Affects 

One of the most popular ways to make money in the financial markets is currency trading. One of the main reasons it has reached the heights it enjoys today is its ease of entry and its ability to trade from anywhere in the world where there is an internet connection.

The advent of mobile devices has also contributed to the fact that more and more traders can access the Forex market through smartphones or tablets.As the Forex market continues to attract more traders, it is important to consider some of the essential aspects of Forex trading and forex trading platforms in India. One of the important aspects that every trader must fully understand before entering the market is the currency spread. These are the main costs that Forex traders incur once they open a new position.


 
Therefore, it is good to understand how the currency spread affects a trader's account earnings. To get complete. picture, it is important to illustrate how the currency spread is derived and how its cost is calculated on an open trade. Explanation of foreign exchange market purchase and sale spread for those familiar with the stock market, the bid-ask spread is basically the difference between the bid price of a stock and the quoted bid price of the same stock. In the stock market, the buying and selling prices are determined by market forces. also, we know about the foreign exchange market today.

The Bid-Ask forex spread explained

Things are a bit different in the forex market, as it all depends on the type of broker you have. For those dealing with ECN forex brokers, the best brokers in India for forex things are a bit similar to the stock market. The bid and ask prices are determined by market forces. However, for traders using trading desk brokers commonly referred to as market makers, things are very different. There are forex brokers that charge extremely high spreads, but it is also possible to find low spread forex brokers on both the trading desk and non-trading desk platforms. A market maker determines the spread, which means that different brokers offer different spreads for their clients. For example, a broker may choose to calculate a margin of 2 pips on the EUR / USD currency pair (a pip is the smallest unit of an exchange rate to the fourth decimal place) while another broker may apply a margin of 1, 5 pips to do the same. How the currency spread is applied to a trade

How the forex spread is applied to a trade
A trader incurs a cost of 1.5 pips immediately after opening a new position, while a similar amount is added to the loss (if the trade closes on a losing position) or is deducted from the profit (if the trade closes in a profitable position). ) becomes). At the end of the day, for a currency spread of 1.5 pips, a trader incurs a total of 3 pips to open and close a trade. Depending on the trading characteristics and a lot of the broker (a lot is the smallest amount a trader can place when opening a trade position), the total cost may vary from broker to broker. Some brokers only allow traders to have standard lots, others have mini lots, while micro lots are also becoming more and more popular. A standard lot consists of 100,000 units, while mini lots are one-tenth of a standard lot. In our example, a retailer would incur a total cost of $ 15 to place a standard lot or $ 1.5 for a single mini lot. The total cost will double after the trade is closed, which means that it is vital that the trade is closed in a profitable position. However, loss reduction can be just as effective on a trade that appears to be trending down and is unlikely to recover.

Conclusion

In conclusion, the forex market offers lucrative opportunities for traders to make money. However, not all merchants are wealthy.  top forex brokers in India comparison. In fact, statistics show that most traders lose money and close their accounts within 3-6 months of entering the Forex market. This could be partly due to your intervention without considering the potential impact of certain aspects of currency trading such as the currency spread. Therefore, it is important to understand how a high currency spread can affect your trading profits. This could help you find the right broker, possibly a low-margin forex broker.

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