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.
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.
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.
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* 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.