Finding the lowest spreads possible is a good skill to have in your Forex trading. By discovering a small spread, you can take advantage of a better chance of hitting a profit. For example, if a currency pair usually has a 2.6 pip spread, you will be more profitable if you can time your trading to incorporate a 2.5 or lower spread.
For example, if you are trading the EUR/USD pair and the buy and sell rates are at 1.32106 and 1.32099, respectively, you are at an immediate disadvantage. This is okay because every single broker will create a spread such as this one in order for them to make a profit. But when the spread shrinks, an even better opportunity is created. For example, the EUR/USD spread might shrink from the above example where it was at 2.7 pips, down to even as far as 2.0 pips. By taking advantage of the varying spreads that most brokers offer, you can greatly improve your chances of turning a profit. Varying spreads mean that you need to be observant. This is a tough thing to do because it requires constant vigilance and quick reflexes as these opportunities don’t last long.
The hardest part about taking advantage of a moving spread, however, is that you have other variables to worry about too—mainly, the actual price. A 2.0 pip spread is great, but if it comes at the cost of buying the currency at too high of a high price, the trade, no matter how lucrative the spread, is not going to be a successful one.
So your best option when trading a currency is to pick a site that offers lower than average spreads on the average. This might mean a little bit of looking around on your behalf, but in the end it will more than pay off. So, if your current broker offers 2.6 pip spreads on the EUR/USD currency pair, and you mainly trade this, you will want to try and find a broker that offers a smaller spread.
Spreads are how brokers make money. This is a simple fact of life and is not going to change. So the trick is to try and turn this to your best advantage. A spread is never going to benefit you, so minimizing the cost will be your best bet. Try and find a broker that offers the lowest spread on your currency of choice and your growing profit rate will thank you. If you trade more than one currency pair, trying to find a single broker might be tough, so be prepared to trade each currency pair on a separate broker. This is a pain, but if you are serious about making money, it might be your best option.