Spread is one of the key concepts in trading. Depending on particular market cases, it can bring losses or profits. It matters a lot for scalpers and intraday traders – market participants who create a lot of trades with a small target profit.
A negligent attitude to this stock indicator will lead to financial losses. Therefore, experienced traders will first learn about its size when they decide whether or not to cooperate with a Forex broker.
DotBig broker offers its clients low-spread trading. You will learn more about the advantages of this approach and why users choose this platform.
Spread in Simple Terms
Simply put, it is a figure demonstrating the difference between the purchase and sale price of an item on the market. Thus, there are two rates stand out:
- Ask is the larger of the two prices. According to it, the asset is sold to the buyer (it is also called the price of a seller). That is, a purchase is made using it.
- Bid is the smaller of the two rates. It is called the price of a buyer. At this price, the asset is bought back from you, and sales transactions are opened according to the Bid.
The spread is part of the earnings of brokers and banks. For example, Italian bank Intesa sells euros for one price and buys for another. The spread, in this case, is the difference between these two values.
There is a spread on all markets and instruments – futures, stocks, cryptocurrencies, etc.
Factors affecting the spread
- Liquidity. Here is a clear example – currency pairs with high trading volumes (EUR/USD), BTC, and the “blue chips” of the American stock exchange often have a pretty low spread. This is because the more liquid an asset is, the smaller the spread will be.
- Volatility. When Forex faces large fluctuations (for example, when crucial economic news is released), the spread can increase significantly. During periods of quiet trading, this indicator usually narrows. For example, in the first hour of the opening of the American stock exchange, volatility in many tools increases sharply due to the large number of deals made by market participants. This can be seen by the volume growth and sharp price movement on the chart of the DotBig Forex broker site.
- Bidding period. The purchase price and the sale price of assets in the financial markets may vary depending on the time of day. An increase in the number of participants at a certain trading hour helps to increase the liquidity of the market. As a result, assets tend to move more stably during such periods, without sudden fluctuations, which in turn leads to a normalization of the spread. The maximum liquidity in the market usually occurs at the intersection of trading sessions, for example, European and American, when it is most active.
- The deal size. If there are many participants in the Forex market and the trading volume is high, the spread in this case will be low.
Why Does Spread Level Matter?
The size of the spread is a factor that significantly affects the choice of financial instruments for trading.
The importance of this indicator is related to several factors that can affect the success of trading and the profitability of transactions.
In many cases, it is better for a trader when the spread is low. It means lower transaction costs for a participant.
Moreover, the spread may come as an indicator of the liquidity and volatility of a particular stock tool. As a rule, the smaller it is, the greater the liquidity of a tool, which means that transactions can be completed faster and without high costs. On the contrary, a large spread may indicate low liquidity and high volatility, which makes trading more risky.
The spread level affects the choice of financial instruments for trading, depending on the preferences and the chosen strategy. For those who prefer to make deals quickly and get results immediately, a low spread – like DotBig exchange offers – will be a priority. On the other hand, traders who are willing to take risks for the sake of potentially higher profits may pay attention to instruments with a higher spread.
So, the size of the spread affects the choice of financial tools for trading and investing. However, it is worth considering other factors: liquidity, volatility, and potential profitability together with spreads.
Low DotBig Spreads
The key financial conditions that traders often pay attention to when choosing a broker are trading commissions. At the DotBig investments site, these include spreads and swaps.
The DotBig spread begins at 0 points. Besides, users should remember that the spread depends on current specifics in the financial markets.
DotBig gives access to competitive spreads and an impressive pick of market assets, including currency pairs, raw materials, indices, and crypto. Traders can take advantage of narrow spreads, which can be especially beneficial for those who engage in high-frequency trading or scalping strategies.
For clients who hold overnight positions, DotBig Forex applies an overnight financing fee, also known as a swap. Traders should be aware of these fees when considering their trading strategy and retention periods.
DotBig Reviews From Customers
DotBig aims to create a perfect Forex dealing environment free from hidden fees or unexpected payments. Traders can be sure they will not face unexpected fees when trading with a broker. This transparency helps to establish a trusting relationship with the brokerage company.
What do the existing clients of the exchange say about the platform? In the DotBig reviews, traders note that the company provides all the necessary trading and analytical tools.
Peter, 54 yo, Stockholm
“After starting on this website, I realized I was here for a long time. This broker has a simple registration and verification process, favorable trading conditions, a demo account for novice traders, and low spreads, which is suitable for traders with a limited budget!”
Nicolas, 43 yo, Venice
“This broker is quite respected in Europe and has been on the market for quite a long time. I would generally rate the cooperation with DotBig as excellent. There are many trading instruments, with relatively low spreads, and high leverage. The site is also quite informative.”
Steve, 32 yo, Barcelona
“DotBig is a decent brokerage company, without a doubt. I have been looking for a normal trading satellite for a long time. I have heard a lot about DotBig, but I have always passed by as I did not believe the positive reviews. Then I decided to try it anyway. And I have been trading with DotBig for two years now, and of course, not without problems. But of all the companies I have worked with, this is the best for me.”