Fixed spread account

To fully understand what a fixed spread account is and how it differs from variable spread account it is important to
clarify the meaning of the spread in trading.

In trading, the spread identifies the difference between the purchase price of an asset, also called Bid, and the
selling price, also known as the Ask.

To better understand this definition, let’s assume you are trading on a currency pair, such as the USD / EUR pair,
one of the busiest on the market by far. We could therefore have the following buy and sell values: Bid at 1.06295 and
Ask at 1.06298. The difference between the two prices is 3 Pips, which is the spread.

The spread is therefore a variance that is established by the broker. As mentioned, it can be fixed or variable and
represents the broker’s source of income on the operation.

The fixed spread account is a type of account proposed by brokers in which the spread is always fixed. This means
that a trader knows in advance the spread underlying a trade, regardless of the Ask and Bid values ​​.

In absolute terms, the fixed spread is slightly higher than the average values ​​of the variable spread, but at the
same time remains constant over time and does not undergo any increases linked to market volatility.

Choosing between fixed spread account and variable spread account is the first operation to implement when deciding
to open an account for trading.

The difference between the two types of accounts is quite simple to understand. Those who choose the fixed spread
account will have a difference between Ask and Bid always constant over time, while those who prefer an account with
variable spreads will have to deal with a floating difference, which changes based on certain variables, such as
market conditions at the time of trading, the nature of the selected asset or communications of economic importance.

Traders often question whether it is better to choose a fixed spread account or a variable spread account.

An absolute answer does not exist. As we previously mentioned, the fixed spread is usually slightly higher than the
average of the variable spreads, but – in its favor – it is not subject to the uncertainty of the market: it is a
fixed a rate that cannot be changed.

For these reasons, the fixed spread account is recommended for those who decide to operate on highly volatile
markets.

Choosing a fixed spread account is particularly advantageous for less experienced traders, as this makes it easier to
manage market volatility.

Furthermore, the fixed spread account is recommended for those who want to hold positions for a long time, without
activating a strategy based on shares in the short term.

The disadvantages of a fixed spread account are essentially linked to slightly higher overall costs and to the fact
of being able to miss some opportunities offered by the market. If with variable spreads it is possible to conclude
trading transactions with a limited spread, this is not the case with fixed spreads, where, first, we pay a fixed
spread to the broker.