BEWARE of "reduced spreads."

This applies to any broker promoting "reduced spreads" that are variable.

GFT told me they have lowered their spreads to as little as 1. That is true. The problem is the spreads are variable. You only get a smaller spread when you exit the position at the same or lower spread than you entered it at. If you enter a position when the spread is 1 then exit when it is at 3, your spread is 3.

I have noticed decreased spreads at times when their is no movement in the price (no activity, price stuck in tight range).

I have noticed the spreads increase at times when the opportunity for gains are better (good movement in price, good momentum, analyticals look good to enter a position).

Don't be duped into believing you are getting a deal on variable spreads. If the high end of the variance is 3,4,5,6 or whatever, you should assume that is what your spread will be.

It is like a stock brokerage telling you they have lowered their commissions to as little as $5.00 then, once you are holding a position they decide to charge you $15.00 to get out of it.

I consider this a misleading marketing ploy. Does anyone know if there have been any complaints filed with the National Futures Association regarding this?

But if the spread is lower when you close, thats the spread you pay, right?

I mean, thanks for the heads-up and all but, what would you want the NFA to do?

It is at the least ethically questionable and may be viewed as misleading customers. Similar to how a broker can't advertise they are "commission free" unless they disclose they are charging you a pip spread.

You are correct in stating that you may get a better deal on the way out but what I have noticed is the pip spreads are lower when you are less likely to trade (either in or out) and higher when you are likely to trade.

If you enter a trade at a reduced spread you should be given the same spread or better when you exit the trade. With variable spreads you are basically "gambling" on what spread you will get when you exit. That is why you should consider the highest possible spread the broker offers as what you are paying.

That sounds like good advice. Then, if you do happen to get the lower spread...bonus! What fixed spread broker can offer such a deal?

Seriously though, I agree it's a marketing ploy. I just don't see anything unethical or worthy of a complaint to the NFA as long as there's full disclosure.