What spreads do retail brokers offer in forex?

Retail brokers are all the same, aren’t they?

 

It is usually not true when it comes to forex spread betting. While all retail brokers offer the standard market spreads on major currency pairs, there are often significant differences in offering other financial instruments.

 

It can help you tremendously when deciding which broker to adopt because you will be able to trade different instruments at much tighter spreads than many of your competitors.

 

Some firms have much more comprehensive offerings than others, so having tight spreads could prove very beneficial over time if you use any of these instruments regularly.

 

Here are just some of the types of spread products that retail brokers routinely offer their clients:

 

Commodity CFDs

Commodities are a great way to diversify a trading portfolio. If you see that you are making headway in one market (for example, if currencies are paying off but equities aren’t), then it may be useful to trade the same position in the commodity markets using CFDs.

 

Forex futures

A new and exciting product available from many retail brokers is forex futures contracts.

 

These allow you to speculate on an asset (the currency pair of your choice) without having to directly invest large sums right away because the futures contract has a specified expiry date, and each pip movement will result in a profit or loss for you, which you can simply cash out before the time is up.

 

This makes futures contracts ideal for smaller investors who want to “test the water” before diving in headfirst.

 

Metals futures

Trading metals such as gold and silver is a great way to boost your knowledge of the markets while also proving extremely lucrative if you use this as an educational exercise.

 

Many retail brokers offer very competitive spreads on these types of future contracts. This can be a profitable product for those who want to diversify without investing too much capital into it at first.

 

It’s also a good chance to enhance your knowledge of different markets, which you can then transfer into other trading strategies that have worked well for you.

 

In addition, spreading your exposure across multiple commodities allows you to make money from differences in the prices between each commodity.

 

If all else fails, simply trade copper or oil against forex pairs because these instruments tend to have very tight spreads.

 

This can be a quick way to increase the size of your trading account, but you have to be careful because it is also possible to lose large amounts of money quickly if wrong!

 

Interest rate futures

These are some of the most common types of financial derivatives, and it is straightforward to trade them from almost any location in the world.

 

The main advantage here is that you will usually find tighter spreads on contracts that have a long time until expiry, so there’s no need to worry about liquidating a position effectively.

 

Index CFDs

Indexes such as FTSE 100 and Dow Jones are great vehicles for making money for those who don’t make decisions based on short-term market activity.

 

Spread betting on indexes is extremely popular because you will usually be able to trade at tighter spreads than the underlying stocks. This can help you achieve bigger profits for the same reason that applies when trading forex – small moves in the price make a lot more difference over time.

 

As a result, it is trendy to trade index CFDs to leverage small movements with relatively little risk.

 

Fixed income futures

Another product that many retail brokers have started offering is the ability to trade fixed income future contracts.

 

This gives you access to an entirely new set of products and markets where you can make money without investing directly in products.

 

Iron butterfly spreads

Iron butterflies are extremely advanced trading strategies that allow you to bet on an asset’s price direction (up or down) while also mitigating your potential losses.

 

If you’re not familiar with this type of strategy, then it’s best to leave these types of trades until later because there are much less complicated ways that allow you to make.

 

Binary options

Binary options are incredibly popular with retail traders, and while some brokers offer simple expiry times.

 

Others like Zulutrade allow you to define your risk/reward criteria, which means that there’s no need for short term expiries because trades that aren’t quite right can be rolled over until they work out how you would like them to.

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