What Are Spreads?
Spreads are the difference between the bid and ask prices of a financial asset. They represent a fundamental cost in trading, influencing overall profitability.
Types of Spreads
Spreads can be fixed or variable. Fixed spreads remain constant, offering predictability, while variable spreads fluctuate based on market conditions and liquidity.
Factors Affecting Spreads
Several factors impact spreads, including market liquidity, volatility, and the specific asset being traded. Higher liquidity typically results in tighter spreads.
Comparing Spreads
When evaluating spreads, consider the average spread size, consistency, and how it compares to industry standards. Lower spreads can reduce trading costs, but it's important to assess other broker features as well.
Risk Disclaimer
Trading on financial markets involves significant risks, including the potential loss of capital. Ensure you fully understand spreads and associated risks before trading.
