Lowest Spread Forex Brokers 2021 – Public Finance International

It takes careful consideration to choose between the lowest spread Forex brokers. It’s important to find a broker that meets your trading interests. 

To make things easier for you, we’ve put together a list of the best Forex brokers with low spreads. 

This article outlines the 6 best Forex brokers, along with an outline of the importance of spreads in Forex trading.

Lowest Spread Forex Brokers 2021

Here are the top 6 lowest spread Forex brokers based on average spread, order execution, and brokerage service.

  • Pepperstone
  • Avatrade
  • FP Markets
  • IC Markets
  • Forex.com
  • FXTM

Pepperstone

Pepperstone is the overall best choice for both veteran and beginner traders. It offers various account types to suit every trading style and an impressive average spread of 0.16 pips.

This broker is well-known for its selection of third-party trading platforms, including MT4 and cTrader. Traders also gain access to a range of different trading and crowdsourcing tools.

A downside is that Pepperstone is not listed on the stock exchange. This limits the number of financial assets available. 

Pepperstone Logo

Pros

Cons

Average spreads of 0.16 pips

Not listed on the stock exchange

Low non-trading fees

Access to third-party trading platforms

Great customer service

AvaTrade

AvaTrade is an excellent brokerage choice for active Forex day traders. This broker offers highly competitive fixed spreads of 0.9 pips with no commissions per trade.

You need a minimum deposit of $100 to open a Forex trading account with AvaTrade. This gives you access to all the top Forex trading platforms including both MT4 and MT5. 

On the downside, the brokerage charges high inactivity fees which are not ideal for passive traders.

AvaTrade Logo

AvaTrade Logo

Pros

Cons

Highly competitive fixed spreads of 0.9 pips

Inactivity fees

Wide range of currency pairs 

Easy account opening process

Free deposits and withdrawals

Great research tools

FP Markets

First Prudential (FP) Markets is another excellent low spread Forex broker. This broker provides premium service aimed at experienced day traders. 

It offers tight spreads starting at 0 pips and averaging around 0.45 pips. It offers access to a range of third-party trading platforms for you to choose from as well as an impressive selection of educational content.

On the downside, FP Markets isn’t available to US citizens.

FP Markets Logo

Pros

Cons

Low spreads starting at 0 pips

Not available in the US

Wide selection of trading platforms

Educational resources

Fast order execution

IC Markets

With an average spread of 0.1 pips, IC Markets is one of the lowest spread brokers on this list. This broker’s great spreads and fast order execution make it a top choice for scalpers.

IC Markets charges no deposit or withdraw commission fees. Plus, customers have access to powerful trading platforms including cTrader. 

A downside is that there is a high minimum deposit required to open an account.

IC Markets Logo

Pros

Cons

Average low spreads of 0.1 pips

Minimum account deposit

Fast order execution speed

No withdrawal or deposit fees

Powerful trading platform

Forex.com

Forex.com is one of the top-rated Forex brokers in the US. This broker is another safe and reliable choice offering competitively low spreads to clients.

Forex.com gives you access to 80 currency pairs. Although spreads are low, there is a flat commission rate of $5 per standard lot. It offers three premium trading platform options as well as the popular MT4 platform. 

A downside is that passive traders will face inactivity fees. There is also a long waiting period for account verification.

forex.com logo

forex.com logo

Pros

Cons

Top-rated broker

Inactivity fees

Low Forex fees

Long account verification waiting period

Diverse research tools

Great range of currency pairs

Access to premium educational resources

FXTM

ForexTime (FXTM) is another reliable choice for both experienced and beginner Forex traders. With a great selection of account types, FXTM offers traders low spreads starting at 0.1 pips.

This broker gives clients access to over 200 markets which includes 48 Forex currency pairs. It stands out for its excellent customer service and educational tools. 

On the negative side, FXTM charges high CFD trading fees. There are also inactivity fees and withdrawal fees.

forex.com logo

forex.com logo

Pros

Cons

Low spreads from 0.1 pips

High CFD fees

Responsive customer service

Inactivity and withdrawal fees

Extensive educational tools

Fast account opening process

What is Spread in Forex Trading?

The spread is the difference between the ask and bid price on a trade. A low spread means that there is a small difference between the bid and the ask price of a currency pair. An increase in spreads usually means that there is high volatility or liquidity in the market. Spreads usually widen during less frequent trading hours, big shock, or before news events.

The spread is how no-commission Forex brokers make a profit. The cost is built into the ask and bid prices of each currency pair that you trade. This is done instead of paying a commission fee per trade. 

How does it work?

The bid price is the price at which you are willing to sell a currency and the price at which a broker is willing to pay for it.

The ask price is the price at which you buy the same currency and the price at which a broker is willing to sell it. The bid price is generally lower than the ask price.

When you buy a currency pair from a Forex broker, you buy the base currency and sell the quote currency. When you sell the currency pair, you sell the base and receive the quote currency. Currency pairs are quoted based on their bid and ask prices.

A currency quote is the value of one currency compared to another foreign currency. These two currencies are known as the base currency and the quote currency. The base currency is always the first currency listed. The second one listed is the quote currency.

How are spreads calculated?

Spreads are a key figure when determining your trading cost. This price difference is calculated in pips. Pip stands for “percentage in points”. In Forex trading, 1 pip is usually equal to 1 point movement in market value. This is based on the fourth decimal place of your currency pair.

To calculate the spread, you need to work out the difference between the buy and the sell price in pips. All you need to do is subtract the bid price of a currency pair from the ask price. 

1 pip is equal to 0.0001 for most currency pairs.

An example of a 1 pip spread for USD/EUR would be 1.1061/1.1062.

What is considered good spread?

Spreads are considered good when they are low. Low spreads usually have an average of below 1 pip. An example of a good spread would be 0.5 pips for a currency pair.

How does a good spread make a difference?

The lower the spread, the cheaper it is to place a trade order. A low spread means that the cost of trading is less. Incorporating spreads into your trading strategy is a key way to make higher profits.

On the other hand, make sure you check what other commissions your broker charges. Some low spread brokers charge higher commissions to make a profit.

Scalping and Low Spreads

Finding the lowest spread Forex broker is particularly important for scalping. Scalping is a trading strategy that involves profiting off of small price changes. Traders make a fast profit off reselling in a high number of trades. This means that traders need fast order execution and a strict exit strategy as one large loss could erase the many small gains made.

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