Broker to Trading

In general, brokers offer variable spread Forex trading on MT4. Variable spreads means that the spread can be expected to change, sometimes relatively rapidly. However some brokers may offer fixed spread trading on MT4. Fixed spreads can be expected to vary to an extent, depending on market conditions, though some brokers say that spreads do not vary.

Why would a trader want to trade with fixed spreads ? With a fixed spread, the trader can know beforehand what the spread cost of the trade will be at the open and close of the trade, which can be helpful when making trades based on target values for example, as it removes one variable in the cost of the trade (the other being the actual market price). However the fact that a fixed spread is not necessarily fixed, means that relying on a fixed spread may not be possible in volatile market conditions, for example during a news event (when they might be most useful). The 'downside' of fixed spreads is that they tend to be fixed higher than variable spreads lows.

Traders though looking for relatively stable low Forex spreads may want to consider an ECN broker, as they can typically offer variable low spreads and low average spreads for the more liquid Forex pairs. However the ECN broker normally adds a commission charge, which itself tends to be fixed (though it may be volume dependant). Therefore the total cost will not necessarily be lower than at a broker which does not charge commissions (which a fixed spread broker typically does not). The spread may be relatively stable, though this will depend on liquidity and volatility, which can be related, as spreads can widen as liquidity drops in the market prior to a news release.

So traders looking for spread cost stability may find it in fixed spreads, with the caveat that they may alter as well. Also there is the consideration that the broker, if it uses dealing desk intervention, may not allow some kinds of trades relying on fixed spreads in volatile markets. A potential advantage of a MT4 fixed spread broker, is that the trader can use automated trading strategies to trade with fixed spreads, assuming the broker allows Expert Advisors with fixed spreads.

What all this implies is that a fixed spread MT4 broker may have an advantage in terms of spread stability at least in normal market conditions over variable spread brokers, but ECN brokers may offer a more conducive environment for trading in some market conditions which a fixed spread trader may seek to take advantage of, even though they are offering variable spreads. Traders may not seek to trade in this way and may find that a fixed spread MT4 broker offers a number of advantages in terms of combining the power of MT4 with the relative reliability of fixed spreads.