Foreign Exchange Dealer

Foreign Exchange DealerAsk your foreign exchange dealer about the spreadsFinding a foreign exchange dealer with a good spread policy can result in a big payoff. Normally, the cost of switching brokers is relatively low. Proper research on the competition is well worth the time, effort, and investment.Before you make the decision to switch brokers, you need to understand what spreads are really costing you. Then you can begin to see how lower spreads can improve your returns. When choosing a foreign exchange dealer, you also will want to ask the right questions and understand different brokers' quality of execution--given your trading style.What is a spread?A spread is the difference between the ask price (the price you buy at) and the bid price (the price you sell at) quoted in pips. Brokers make most of their money through the spread. Wider spreads result in a higher ask price and a lower bid price. As a consequence, you often may find yourself paying more when you buy and getting less when you sell. The spread compensates the market maker for taking on risk from the timeHow do spreads affect forex trading?Spreads affect the return on your trading strategy more than you think. Traders simply want to make money – by buying low and selling high. Wider spreads means buying higher and having to sell lower. A half-pip lower spread doesn't sound like much, but it can easily make the difference between a profitable trading strategy and an unprofitable one.Tight spreads return the most cashThe tighter the spread, the better return for you – but not necessarily for your foreign exchange dealer. Tight spreads are meaningful only when they are executed in the way the trader intends. If your trade is somehow rejected or delayed execution, or your notice slippage and stop-hunting are getting in the way of your executions, it may be that your broker is being dishonest with you. It’s time to get a new broker when tight spreads are continuing to be displayed, but are delivered wide. It means that the system is being manipulated to your disadvantage.What are your broker’s spread policies?Spread policies usually differ depending on the broker. Sometimes you need to read the fine print. Some brokers may offer fixed spreads that are guaranteed to remain the same regardless of market liquidity. Other brokers offer variable spreads or different spreads for different clients depending on the amount of money they invest. Ask your broker for the paperwork that details their spread policies to make sure you are getting the best spread for your investment.Foreign exchange dealers all approach their clients in different ways, but they all report to the same commissions and should be able to provide you with their policies in writing. The Forex marketplace is an exciting place to begin trading, and if you’re a new trader, it is highly recommended you read as much material as possible before you begin your trading plan. Don’t let brokers spend your profit on their fees. Make an educated decision