CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 63% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the High risk of losing your money.

English

What is a spread in forex and CFDs？

Before you understand what a spread is, you should first of all understand that in the foreign exchange market prices are represented as currency pairs or exchange rate quotation where the relative value of one currency unit is denominated in the units of another currency. An exchange rate, applied to a customer willing to purchase a quote currency is called BID. It is the highest price that a currency pair will be bought. And a price of quote currency selling is called ASK. It’s the lowest price that a currency pair will be offered for sale. BID is always lower than ASK. The difference between ASK and BID is called spread. It represents brokerage service costs and replaces transactions fees. Spread is traditionally denoted in pips - a percentage in point, meaning fourth decimal place in currency quotation.

What types of spreads are in forex and CFDs?

The type of spreads that you’ll see on a trading platform depends on the preferences forex broker and their business model. There are two types of spreads: FIXED and VARIABLE (also known as “floating”). Fixed spreads are usually offered by brokers who operate as a market maker or the 'dealing desk' model while variable spreads are offered by brokers operating a 'non-dealing desk' model.

What is slippage and how to reduce the effect of slippage?

In financial trading, slippage is a term referring to the difference between a trade’s expected price and the actual price at which the trade gets executed. It is a phenomenon that occurs when market orders are placed during periods of elevated volatility, as well as when large orders are placed at a time when there is insufficient buying interest (liquidity depth) for a given asset. This way the instrument would not maintain the expected buy or sell price.


Although it is impossible to avoid the spread between entry and exit points completely, there are two main ways to mitigate them and minimise slippage:

(A) Changing the type of market orders
Slippage is a result of a trader using market orders to enter or exit trading positions. For this reason, one of the main ways to avoid the pitfalls that come with slippage is to make use of limit orders instead.
(B) Avoiding trading around major economic events
In most cases, the biggest slippage will occur around major and market-moving news events. It’s important to monitor the economic calendar for news related to your favorite instuments; it can suggest the direction in which the asset is going to move and then it can help to avoid highly volatile times that occur around major news events.

How to calculate pips in different currency pairs and CFDs?

A pip is a unit of measurement for currency movement and is the fourth decimal place in most currency pairs. For example, if the EUR/USD moves from 1.1015 to 1.1016, that's a one pip movement. Most brokers provide fractional pip pricing, so you'll also see a fifth decimal place such as 1.10165, where the five represents a half pip.
Pip Values (PV) are calculated as follows:

• For currency pairs where USD is listed as second: 1 standard lot equals to 100,000 units. If the smallest fluctuation can be expressed as 0.0001, then in the EUR/USD pair the PV = 100,000 × 0.0001 = $10.

The fixed pip amount is: $10 for a standard lot which is 100,000 worth of currency; $1 for a mini lot which is 10,000 worth of currency and $0.10 for a micro lot which is 1,000 worth of currency.

• For Gold (XAU/USD):
1 lot = 100 oz. of gold = pip value of $1.00; 1 mini-lot = 10 oz. of gold = pip value of $0.10; 1 micro-lot = 1 oz. of gold = pip value of $0.01
• For Silver (XAG/USD):
1 lot = 5000 oz. of silver = pip value of $5.00; 1 mini-lot = 500 oz. of silver = pip value of $0.50; 1 micro-lot = 50 oz. of silver = pip value of $0.05

• For US OIL: Every lot or one contract of UKOIL (Oil) or USOIL (WTI) is equal to 1,000 barrels of oil. The smallest fluctuating unit is 0.001; and so PV = 1000 × 0.001 = 1 USD

• For Indexes: Contract volume of various indices is different. Taking GER30 as an example, the size of 1 standard lot is 10. If the minimum fluctuating unit is 0.1, VP = 10 × 0.1 = 1 EUR.

Fixed vs Variable Spreads: Which is Better?

In general occassional traders with smaller equity who trade less frequently will benefit from fixed spread pricing. While aggressive day traders who open orders frequently during peak market hours (when spreads are the tightest) will benefit from variable spreads. Traders who want fast trade execution and need to avoid requotes will want to trade with variable spreads.

Quotation Charts

STANDARD account RAW SPREAD account Spread
Symbols BUY price SELL price Spread BUY price SELL price Spread Difference
EURUSD 1.18068 1.18085 17 1.18076 1.18077 1 16
USDJPY 104.609 104.628 19 104.617 104.619 2 17
GBPUSD 1.30167 1.30187 20 1.30175 1.30179 4 16
AUDUSD 0.71219 0.71239 20 0.71227 0.71231 4 16
EURGBP 0.90698 0.90715 17 0.90705 0.90708 3 14
USDCHF 0.90914 0.90937 23 0.90923 0.90929 6 17
XAUUSD 1900.50 1901.02 52 1900.60 1900.93 33 19
XAGUSD 24.295 24.326 31 24.305 24.316 11 20
UKOILF 35.54 35.62 8 35.55 35.60 5 3
HK50 24695 24725 30 24706 24714 8 22
Open a Live Account

Important note:

* The quotation chart curve is generated from the ask quotes of the particular instument. Because of the spread of the bid and ask quotes, the chart curve cannot fully reflect the history of the bid quotation.

* Instruments history is displayed 10 - 30 minutes after opening and before closing. Occasionally, due to insufficient liquidity, slippage, order rejection and multi-layer transactions technology may misbehave. Please pay attention and carefully select your trading sessions.

* Monthly employment situation reports, inflation rates, consumer prices and quarterly GDP calculations all impact market performance. Typically these results have an effect prior to publishing of these reports; and this is reflexted in the proce of stocks. For instance, if traders expect GDP to rise by a quarter per cent, they will trade stocks at prices that reflect the increase for days and weeks before the report is released. If the report is different than the expected number, the market may quickly fluctuate. Make sure you pay special attention to your opened positions at these times, and do not fall victim to the false judgements and advice.