Why floating spread is better then fixed | Forex Factory

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Why floating spread is better then fixed

  • #1
  • First Post: Jan 25, 2008 1:47am Jan 25, 2008 1:47am
Hello everyone.

I found a broker with Metatrader with floating spread from 1 pip coming from Multibanks ECN. Actaully I do not know what is ECN?
Who can explain me why floating spread is better then fixed? I was told so by one my firends
I found few brokers with 1 pip fixed spread like Crown.
I am willimg to open 500 usd account and can not make desicion.
Please recommend me something.
  • #2
  • Jan 25, 2008 7:51am Jan 25, 2008 7:51am
Quoting Aijan
Hello everyone.

I found a broker with Metatrader with floating spread from 1 pip coming from Multibanks ECN. Actaully I do not know what is ECN?
Who can explain me why floating spread is better then fixed? I was told so by one my firends
I found few brokers with 1 pip fixed spread like Crown.
I am willimg to open 500 usd account and can not make desicion.
Please recommend me something.
Take a fixed spread, cause the news time is the best time to trade and make some serious money. Floaters raise it , and beat you over the head. So I would go with a fixed spread.

Live and learn Newbie
  • #3
  • Jan 25, 2008 9:14am Jan 25, 2008 9:14am
Quoting Aijan
Hello everyone.

I found a broker with Metatrader with floating spread from 1 pip coming from Multibanks ECN. Actaully I do not know what is ECN?
Who can explain me why floating spread is better then fixed? I was told so by one my firends
I found few brokers with 1 pip fixed spread like Crown.
I am willimg to open 500 usd account and can not make desicion.
Please recommend me something.
I think you need to do some more homework before you open an account.......
Same Whore .... Different Dress
  • #4
  • Jan 25, 2008 9:19am Jan 25, 2008 9:19am
And do not listen to mike999, trading the news is a one way road to blowing account (except if you know the figures before the news is released of course)

Broker who offers fixed spread do not like news trader. Broker with floating spread do not care are they usually are ECN so the get commissionned every time you take a position (close or open trade)
  • #5
  • Jan 25, 2008 10:23am Jan 25, 2008 10:23am
You need to take a moment and think about this: when major volatile news events occur the big guys (ie banks) widen their spread. So if you're trading with a broker with fixed spreads do you really think he is going to eat the loss just so you can have your fixed spread? No. They will find a way to make up for the cost of their promise and I think you can guess who will pay for that cost.
  • #6
  • Jan 25, 2008 12:17pm Jan 25, 2008 12:17pm
Quoting Aijan
Hello everyone.

I found a broker with Metatrader with floating spread from 1 pip coming from Multibanks ECN. Actaully I do not know what is ECN?
Who can explain me why floating spread is better then fixed? I was told so by one my firends
I found few brokers with 1 pip fixed spread like Crown.
I am willimg to open 500 usd account and can not make desicion.
Please recommend me something.
You should do some serious studying before opening a live account. Unless, of course, you have money to throw away.

http://www.babypips.com/school/

And, do yourself a favor, don't trade the news. That's only for experienced traders.
  • #7
  • Jan 25, 2008 12:26pm Jan 25, 2008 12:26pm
Quoting ForexTraderMan
You need to take a moment and think about this: when major volatile news events occur the big guys (ie banks) widen their spread. So if you're trading with a broker with fixed spreads do you really think he is going to eat the loss just so you can have your fixed spread? No. They will find a way to make up for the cost of their promise and I think you can guess who will pay for that cost.

You say here that banks "widen their spread"
Is it not the case that a lack of orders widens the spread, how can a bank choose to widen the spread, when it deals only with other similar sized entities?
What I'm saying is the market as a whole creates the spread, not 1 individual bank. So if your broker has credit lines with a few banks then the spread is what it is, whether ya like it or not.


To the original poster I would recommend Oanda or IBFX, not for the spreads but the ability to trade very small.
  • #8
  • Jan 25, 2008 12:38pm Jan 25, 2008 12:38pm
Ted - this is true but you need to remember that this market is OTC. That means that during a major news event different banks will offer very different prices and I also know from a friend who worked with the dealers before that sometimes they don't make a market at all. So suppose you are a broker who offers fixed spreads and you have 4 banks streaming in quotes - all of those quotes could be very different, ie what they call best bid / best ask. So the spread will be vary. But if you offer fixed spreads what are you going to do? Probably delay execution of orders, etc. Either way trading news is not my thing but on fixed spreads you're def allowing yourself to get in trouble.
  • #9
  • Jan 25, 2008 12:48pm Jan 25, 2008 12:48pm
Ha!

I want to put my two cents here:

1) Who is the broker with floating spreads? I'd like to research them.

 

  1. Be careful.... a floating spread does not mean "Non dealing desk"
  2. Case and point: FXLQ had a floating spread, but still had a dealing desk.

2) "Fixed" spreads will widen during news releases. (see broker's protective clause in fine print.)

3) Fixed spreads often widen more than floating spreads during news releases (if the float is a true NDD) You need to open them side by side and compare.

  • #10
  • Jan 25, 2008 1:43pm Jan 25, 2008 1:43pm
Quoting melpheos
And do not listen to mike999, trading the news is a one way road to blowing account (except if you know the figures before the news is released of course)

Broker who offers fixed spread do not like news trader. Broker with floating spread do not care are they usually are ECN so the get commissionned every time you take a position (close or open trade)
Oh GOD! Melpheos is talking about blowing... his favorite hobby
  • #11
  • Jan 25, 2008 2:03pm Jan 25, 2008 2:03pm
Quoting WHTenn
Oh GOD! Melpheos is talking about blowing... his favorite hobby
talking like that will get you ban, take a little off and come back with a fresh mind.
If I Go Broke Trying Then I Will die happy.
  • #12
  • Jan 25, 2008 2:07pm Jan 25, 2008 2:07pm
Quoting melpheos
And do not listen to mike999, trading the news is a one way road to blowing account (except if you know the figures before the news is released of course)

Broker who offers fixed spread do not like news trader. Broker with floating spread do not care are they usually are ECN so the get commissionned every time you take a position (close or open trade)
well look like you both need to cool down.
If I Go Broke Trying Then I Will die happy.
  • #13
  • Jan 26, 2008 6:22am Jan 26, 2008 6:22am
The bad thing about floating spread is that they will widen during news and might trigger your stop loss.
  • #14
  • Jan 26, 2008 8:01am Jan 26, 2008 8:01am
I am currently trading on both sides: Fix and Floating. I would prefer a FIX Spread broker anytime!

I trade GBPUSD. On the Fix spread broker, I pay 4 pips spread regardless of market volatility. On the floating spread broker, I usually get in at 3 pips, very very seldom do I get in at 1 pip. YET when I want to exit, the spread would be 5-7 pips! HELL I paid more!

This week, I was in a SELL GBPUSD trade, price went more than 25 pips in my favor; I placed SL to BE+5 to lock in some profits, guess what? price retraced a little then broker SPIKED it to above my entry price and I ended with a 3 pip loss (SL not guaranteed even!). If it was on a FIX SPREAD BRoker, that position would have ended with +100 pips profit!

Yesterday, I was Long GU, I was making pips, and I placed STOP above BE.. Guess what? Check screen shot! They tried again to take my stop? F*** Y**!

Since I funded this account via Credit Card, I am not eligible for withdrawal just yet; I will close it down for good next week and wont look back.

Be aware that Floating Spread MT4 brokers are not true ECN. They only make you think they are. They have wider spread compared to ECN; they have wider spread even compared to fix spread brokers! DONT BE FOOLED! They only advertise that their spread can go as low as 0 pips yet that will happen only 0.01% of the day! Most of the time, it is at par, if not higher than the fix spread broker. SO why bother?

FLOATING SPREAD BROKER? KEEP OUT! DON'T BE FOOLED!

IF you have a STOPLOSS of less than 100 pips, chances are you will get stopped out during news! My currently floating spread broker widens 25~50 pips above ASK and 25~50 pips below BID prices on MINOR NEWS. I even saw it widen more than that. I dont have to bother watching the spread during news like NFP - I bet 100 pips SL will be taken out for sure.

IF however you are a long term 200~500 pips TP kind of trader, then a floating spread broker will not matter to you.
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  • #15
  • Edited 3:43am Jan 27, 2008 2:56am | Edited 3:43am
Quoting tdion
Ha!

I want to put my two cents here:

1) Who is the broker with floating spreads? I'd like to research them.

  1. Be careful.... a floating spread does not mean "Non dealing desk"
  2. Case and point: FXLQ had a floating spread, but still had a dealing desk.

2) "Fixed" spreads will widen during news releases. (see broker's protective clause in fine print.)

3) Fixed spreads often widen more than floating spreads during news releases (if the float is a true NDD) You need to open them side by side and compare.

The broker is Ikon Global markets. Any Idea?
  • #16
  • Jan 27, 2008 3:17pm Jan 27, 2008 3:17pm
Quoting BurgerKing
I am currently trading on both sides: Fix and Floating. I would prefer a FIX Spread broker anytime!

I trade GBPUSD. On the Fix spread broker, I pay 4 pips spread regardless of market volatility. On the floating spread broker, I usually get in at 3 pips, very very seldom do I get in at 1 pip. YET when I want to exit, the spread would be 5-7 pips! HELL I paid more!

This week, I was in a SELL GBPUSD trade, price went more than 25 pips in my favor; I placed SL to BE+5 to lock in some profits, guess what? price retraced a little then broker SPIKED it to above my entry price and I ended with a 3 pip loss (SL not guaranteed even!). If it was on a FIX SPREAD BRoker, that position would have ended with +100 pips profit!

Yesterday, I was Long GU, I was making pips, and I placed STOP above BE.. Guess what? Check screen shot! They tried again to take my stop? F*** Y**!

Since I funded this account via Credit Card, I am not eligible for withdrawal just yet; I will close it down for good next week and wont look back.

Be aware that Floating Spread MT4 brokers are not true ECN. They only make you think they are. They have wider spread compared to ECN; they have wider spread even compared to fix spread brokers! DONT BE FOOLED! They only advertise that their spread can go as low as 0 pips yet that will happen only 0.01% of the day! Most of the time, it is at par, if not higher than the fix spread broker. SO why bother?

FLOATING SPREAD BROKER? KEEP OUT! DON'T BE FOOLED!

IF you have a STOPLOSS of less than 100 pips, chances are you will get stopped out during news! My currently floating spread broker widens 25~50 pips above ASK and 25~50 pips below BID prices on MINOR NEWS. I even saw it widen more than that. I dont have to bother watching the spread during news like NFP - I bet 100 pips SL will be taken out for sure.

IF however you are a long term 200~500 pips TP kind of trader, then a floating spread broker will not matter to you.
BurgerKing, it really depends on what type of trading you want to do. If you want to scalp, then a floating ECN would probably be better, since they have very low spreads on GBP/JPY.

If you want to trade the news, then obviously a fixed spread broker would be ideal.

Do you mind if I ask which fixed-spread broker you're trading with?

Many thanks.
  • #17
  • Jan 27, 2008 3:58pm Jan 27, 2008 3:58pm
Quoting ForexTraderMan
You need to take a moment and think about this: when major volatile news events occur the big guys (ie banks) widen their spread. So if you're trading with a broker with fixed spreads do you really think he is going to eat the loss just so you can have your fixed spread? No. They will find a way to make up for the cost of their promise and I think you can guess who will pay for that cost.
Reqoutes and frozen platform!!! That's what you get with 1 pips spread LOL
  • #18
  • Jan 27, 2008 4:24pm Jan 27, 2008 4:24pm
My initial thoughts are to call and ask them several questions:

1) Are you registered with the NFA?

2) How long have you been in business?

3) Is it a floating spread, or an actual Non Dealing Desk?

4) Minimum account size?

The list goes on.........

Then I'd use the government website to look up the company's financials...

Quoting Aijan
The broker is Ikon Global markets. Any Idea?
  • #19
  • Jan 27, 2008 5:54pm Jan 27, 2008 5:54pm
Be reminded that my previous post was a comparision between a Fix Spread MetaTrader Broker (NF) vs a Floating Spread MetaTrader Broker (RoyalIkon)- AND NOT vs a True ECN (such as Currenex or Oanda even).

I tried trading with Royal Ikon because they offered lower spread - JEZZ ya right - tight spread during absurd time when I dont trade/asleep. Spread Widening screws up my EA/Automated Trading likewise as this broker spikes their prices up/down as if Im watching a Cardiogram of a man in deep stress.

Regardless of trading, a game playing broker is to be totally avoided. Why in hell would you trade with a broker who spikes the prices when you can get better deal with a Fix Spread broker - There are lots and lots of honorable fix spread brokers out there! And why would you want to trade with a Floating Spread cheater broker when you can trade so with a REAL Floating Spread ECN brokers?

Floating Spread reflects the "Liquidity" of the market. BUT if a Floating Spread Broker's spread is wider than the average ECN, then it suggest that this "Floating Spread" broker dont have the liquidity. Another reason to jump ship.

Lesson: Trade with any Honorable Fix Spread Broker or with a TRUE ECN Broker.

NOW, why i traded at this Floating Spread Broker?
1. I was lured by the "lower spread" gimmick
2. They have faster execution than my fix spread broker - But this, as I learned, does not mean better execution (or better price).
  • #20
  • Jan 28, 2008 1:21pm Jan 28, 2008 1:21pm
Quoting BurgerKing
Be reminded that my previous post was a comparision between a Fix Spread MetaTrader Broker (NF) vs a Floating Spread MetaTrader Broker (RoyalIkon)- AND NOT vs a True ECN (such as Currenex or Oanda even).
Sorry, I didn't realise this.

Yes, I totally agree with you BK.
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