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Variable vs. Fixed Spreads

  • Post #1
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  • First Post: Jan 26, 2007 8:33pm Jan 26, 2007 8:33pm
I'm wondering about the advantages/disadvantages of 'no dealing desk' variable spreads vs. 'dealing desk' fixed spreads. I'm particularly worried about spreads getting so wide (e.g. gbp/usd) that a stop may be hit with the varialble spread option - but not with the fixed spread. Any thoughts?
Quoting schpsyk
I'm wondering about the advantages/disadvantages of 'no dealing desk' variable spreads vs. 'dealing desk' fixed spreads. I'm particularly worried about spreads getting so wide (e.g. gbp/usd) that a stop may be hit with the varialble spread option - but not with the fixed spread. Any thoughts?
Whilst reading your post i noticed a whole bunch of questions that related to yours just at the bottom. Including this one...

http://www.forexfactory.com/showthread.php?t=7564

The Search Tool is your friend.

Lux
MT4 EA, Indicator and Alert Coder Since 2006
since nobody else bothered answering your question on the variable spreads maybe i can. i had the same question and realized that YES it can act against you since it CAN and will reach out further against your position and stop you out when it widens... good thinking !!
My thoughts have always been that it's easier to strategize when you know what the parameters are. Thus, with a fixed spread, you know the playing field going in and, if you get to the point where you're very successful, you can negotiate the spread down in the future.

With a variable spread you'll always be at the mercy of the broker.
Quoting schpsyk
I'm wondering about the advantages/disadvantages of 'no dealing desk' variable spreads vs. 'dealing desk' fixed spreads. I'm particularly worried about spreads getting so wide (e.g. gbp/usd) that a stop may be hit with the varialble spread option - but not with the fixed spread. Any thoughts?

EFX is a partnered broker with ForexFactory. They have variable spreads and I am telling you now, 2/2.5 pip spreads on GBP vs the 4 fixed on many platforms will save you a lot of money in the long run. As for getting stopped out when the spread widens? It does during news events mostly, get out before or widen your stop before hand... there really is not getting away from those circumstances.

My vote is certainly variable.
The market is my nation. Traders, my family. Hello, brothers and sisters!
increase your stop? no way ! i would much rather have fixed spreads, if your trades are good, that extra 1.5 -2 pips are peanuts, compared to increasing spread by 20 trying to be safe
My old MT4 broker, had a fixed 4pip spread on cable, but on NFP days, I have seen this spread widen to 60+ pips, which will knock out stops.

I have been demo'ing various ECN brokers, and I now trade futures. I beleive the most I have seen the spread widen is around 6 -8 pips for a few seconds, while NFP numbers are release. Most of the time, I get 1-2pip spread on these.

Futs - 2pip spread (6.25/pip) = $12.50 + comms ($5.70r/t) = $18.20
MT4 - 4pip spread (10/pip) = $40 No comms = $40

So using a MT4 broker, you will be paying around $21.80 extra per trade. A few ECN brokers, do give you a good commission rate if you do volume, and their spread matchs those of futs.

Food for thought.
with the popularity of forex, it has generated another bread of Crooks, the forex broker! (some) Oanda widen their spread to 30 pips when it suits them, mainly news so they can steal your money. They say it's a liquidity issue during news. That been said, why is it that during volatility, such as news that futures get filled more easily? who is telling the truth? Remember, the futures markets are regulated & controlled, the forex brokers are not.
Quoting MuppetMan
I have been demo'ing various ECN brokers, and I now trade futures. I beleive the most I have seen the spread widen is around 6 -8 pips for a few seconds, while NFP numbers are release. Most of the time, I get 1-2pip spread on these.
Yeah I was going to say, that if you have a true ECN broker, the spread should not widen more than ten pips on news, unless you were trading some really exotic cross with low volatility, such as the GBPAUD when the BoE makes an interest rate announcement.

Quoting MuppetMan
Futs - 2pip spread (6.25/pip) = $12.50 + comms ($5.70r/t) = $18.20
MT4 - 4pip spread (10/pip) = $40 No comms = $40

So using a MT4 broker, you will be paying around $21.80 extra per trade. A few ECN brokers, do give you a good commission rate if you do volume, and their spread matchs those of futs.
Two of the three ECN brokers* I know of happen to trade futures as well.

The other advantage to trading FX futures is that the interest rate is built into the price, so for those who are longer term traders, you don't have to worry about calculating overnight interest into your trades.

* Interactive Brokers and MBTrading/EFX (EFX is a recent spin-off of MBTrading that is focused on FOREX).
  • Post #10
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  • Last Post: May 18, 2007 1:13am May 18, 2007 1:13am
1st most ECNs often referred here has true ECNs don't have stops
example. Hotspotfxi or Lavafx

2nd it would all depend if your able to get hit on the bid/offers or are you just able to buy/sell on the variables
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