Lowest Spread Forex Brokers

Lowest spread forex brokers

In forex trading a low spread is crucial, not only to give traders a more favourable entry price, but also important for those employing scalping or hedging strategies. Thus, a 0 pip spread is the perfect spread for both strategies.

But above all, spreads are an important part of the overall trading costs. This means smaller spreads, more profit for traders. To find one of the best lowest spread forex brokers for your strategy, check out our comparison table, sorted by pricing rating.

The pricing rating is how our industry experts rate each broker's spreads and overall cost of trading. This also includes trading commissions, deposit and withdrawal fees, and other charges.

What is the Spread in Forex?

What is the Spread in Forex

The spread in forex is the difference between the bid and the ask price, for each single currency pair. This value (the spread) is also the profit of the forex brokers, who buy the base currency at bid price (lower) and sell the quote currency at ask price (higher).

A practical example of a forex broker spread for the GBP/USD pair, and from the trader’s perspective, would be:

    Buy price (ask price) 1.38381 vs sell price (bid price) 1.38371 = spread 1 pip.

This means that the broker is willing to buy the base currency (GBP) from the trader at 1.38371 (bid price) in exchange for selling the quote currency (USD) to trader at 1.38381 (ask price).

By selling at a higher price and buying at a lower price, the broker makes a profit on the spread. Because traders always buy at a higher price, and sell at a lower price, this also means that investors will, invariably, start a trade always in loss.

Of course, if the spread would be 0 pip, a trader could open and close a position on the same instant, without a profit, or a loss. But in reality, this is impossible. ECN forex brokers market their spreads "as low as 0 pip", but there's also trading commissions added to the total cost of opening a trade.

    For traders, a currency pair real trading cost is the broker’s spread plus the trading commissions.

These commissions are normally calculated in USD, and they have the equivalent value in pips. For example, 1 pip is 10 USD on a standard forex lot (100,000 currency units).

As we saw above, ECN brokers advertise a 0 pip spread on the EUR/USD pair, but charge a trading commission, usually, 7 USD per 1 round lot. So, a trader opening a buy position of 1 lot at 1.20565 will only reach breakeven if the price goes up to 1.20572 (up by 0.7 pip).

Comparatively, a broker offering a 0.6 pip spread on the EUR/USD pair without commissions, is cheaper to trade with than an ECN broker offering a 0.2 pip spread, but charging a trading commission of 7 USD on the same pair. The total spread with the ECN broker would be 0.9 pip.

Trading commissions in USD can be easily converted in pips (1 pip size is 0.0001), to find out how many pips the price needs to move to reach breakeven (or to know the real spread cost). For that, simply use the following formula:

Commission in USD/pip value (7 USD/10) = commission in pips (0.7 pip or 0.00007)

To find out what would be the brokers’ commissions for different size lots, (assuming a 7 USD commission), simply divide the broker’s commission by 10. Then multiply the currency units of the trading position by the commission in pip size, or, check the table below:

Lot Size Currency Units Commission in Pip Commission in USD
0.01 1,000 0.00007 0.07
0.10 10,000 0.00007 0.70
1 100,000 0.00007 7
10 1,000,000 0.00007 70

How to Lower Your Broker Spreads

What are forex rebates

There’s a way, legal by all means, that thousands of traders use to lower even more the broker’s spreads. Even with ECN brokers with a 0 pip spread, and charging trading commissions.

As we saw above, the trading commissions can also be converted in pip size and value. Clever traders are taking advantage of forex rebates programs, like the one offered by our site.

Forex rebates allows traders to reduce their trading costs and spreads. But at the same time, to earn extra cash from trades, regardless if a trade is closed in profit or loss.

Forex rebates are a cashback program offered by a third-party provider, linked to a forex trading account, and paying a cash rebate for each closed trade.

The cash rebate is a portion of the transaction cost, spread or commissions, or a combination of both, that is paid back to the client on each trade. This results in lower spreads, and above all, an improved win ratio for the trader.

    For example, if the rebate from the broker is 0.3 pip for the GBP/USD pair, and the typical spread is 0.8 pip, then the net spread for the trader is only 0.5 pip.

Also, there is no "catch". The broker spreads will never increase as a result of using a rebates service!  In the end, trading via a rebates provider will result in lower spreads, period. And of course, it is more beneficial to a trader’s financial position to work via a rebates provider than solely with the forex broker.

 TIP Try our Forex Rebates Calculator to accurately calculate how much you can earn in cashback from your closed trading positions with your favourite broker.

To find a complete list of all the brokers, linked to our cashback program and paying rebates, we recommend a quick visit to our Brokers Page. We have several partnerships with brokers paying rebates on forex and cryptocurrencies trades.