5 minute read
what is raw spread in forex
What is Raw Spread in Forex?
Introduction
In the world of forex trading, understanding spreads is crucial to maximizing profits and minimizing costs. One of the most competitive pricing structures offered by brokers is the raw spread model. But what is raw spread in forex? How does it differ from standard spreads, and why should traders consider using it? This comprehensive guide will provide everything you need to know about raw spreads, their advantages, disadvantages, and how they compare to other spread types.
Top 10 BEST Forex Brokers
1️⃣ Exness: Open Account | Go to broker
2️⃣ JustMarkets: Open Account | Go to broker
3️⃣ XM: Open Account | Go to broker
4️⃣Pepperstone: Go to broker
5️⃣Avatrade: Open Account | Go to broker
6️⃣FpMarkets: Open Account | Go to broker
7️⃣XTB: Go to Website
8️⃣FBS: Go to Website
9️⃣Amarkets: Go to Website
Understanding Forex Spreads
In forex trading, the spread is the difference between the bid price and the ask price of a currency pair. Essentially, this is the cost that traders pay when they enter a trade. The tighter the spread, the lower the trading cost. Forex brokers typically offer two types of spreads: raw spreads and standard spreads.
Raw Spread vs. Standard Spread
Raw Spread:
Also known as ECN (Electronic Communication Network) spreads.
Provides traders with direct market prices without any markup.
Usually starts from 0.0 pips, but traders pay a commission per trade.
Best suited for high-volume traders and scalpers.
Standard Spread:
Includes a markup added by the broker.
Typically higher than raw spreads but commission-free.
Ideal for beginners who prefer simplified cost structures.
Advantages of Raw Spreads
1. Lower Trading Costs
One of the biggest benefits of using raw spreads in forex is the lower overall trading cost. Since these spreads originate directly from liquidity providers, they tend to be much tighter than standard spreads.
2. Better Market Transparency
With raw spreads, traders receive direct pricing from major banks and liquidity providers, ensuring full transparency. Unlike standard spreads, there are no hidden markups or price manipulations by brokers.
3. Ideal for Scalping and High-Frequency Trading
Scalpers and day traders require low spreads to capitalize on small price movements. Since raw spreads start from 0.0 pips, they allow traders to execute multiple trades without excessive costs.
4. Faster Execution Speed
Most brokers offering raw spread accounts operate under an ECN or STP (Straight Through Processing) model. This means that trades are executed faster with minimal delays, reducing the chances of slippage.
5. Access to Institutional Pricing
Retail traders benefit from institutional-level pricing, as raw spreads reflect the real-time bid/ask prices from top-tier financial institutions.
Disadvantages of Raw Spreads
1. Commission-Based Structure
While raw spreads are tighter, they usually come with a commission per trade. Traders must calculate whether the combined spread and commission cost is lower than a standard spread account.
2. Minimum Deposit Requirements
Some brokers require a higher minimum deposit for raw spread accounts, making them less accessible to beginners.
3. Market Volatility Impact
During high-volatility events, spreads can still widen temporarily, even on raw spread accounts.
How to Choose a Broker Offering Raw Spreads
If you’re considering trading with raw spreads, selecting the right broker is crucial. Here’s what to look for:
Regulation and Security – Ensure the broker is regulated by reputable authorities (e.g., FCA, ASIC, CySEC).
Commission Fees – Compare commission rates to determine the overall cost.
Execution Speed – Look for ECN/STP brokers with ultra-fast execution.
Trading Platform – Ensure the broker supports platforms like MetaTrader 4 (MT4), MetaTrader 5 (MT5), or cTrader.
Liquidity Providers – The more liquidity providers a broker has, the tighter the spreads.
Best Forex Brokers with Raw Spread Accounts
Some of the top brokers offering raw spread forex trading include:
IC Markets – ECN broker with spreads from 0.0 pips and low commissions.
Pepperstone – Competitive raw spreads and fast execution.
FP Markets – Ideal for scalping and high-volume trading.
Exness – Offers raw spread accounts with leverage options.
Tickmill – Known for tight spreads and low commission fees.
How to Trade with Raw Spreads Effectively
1. Calculate Trading Costs
Before opening an account, use a spread and commission calculator to determine if raw spreads offer cost advantages over standard spreads.
2. Use a VPS for Faster Execution
For professional traders, a Virtual Private Server (VPS) can enhance order execution speeds, reducing latency in fast-moving markets.
3. Monitor Market Conditions
While raw spread forex accounts provide tighter spreads, traders should still be aware of market volatility, as spreads can widen during major news releases.
4. Employ Proper Risk Management
To maximize the benefits of raw spreads, use stop-loss orders, position sizing, and leverage control to minimize risks.
Conclusion
So, what is raw spread in forex? It’s a pricing model where traders get direct market spreads, often starting from 0.0 pips, combined with a commission per trade. Raw spreads offer transparency, lower trading costs, and faster execution, making them ideal for professional traders, scalpers, and high-frequency traders.
However, they are not always the best option for beginners due to commission fees and possible deposit requirements. Before choosing a broker, carefully evaluate commission structures, execution speed, and trading conditions.
For those who prioritize low spreads, high-speed execution, and institutional-level pricing, a raw spread forex account is one of the best choices available. Whether you are a day trader, scalper, or professional forex trader, utilizing raw spreads can significantly enhance your trading experience.
