6.4 Difference between fixed spreads and variable spreads Video Lecture | Forex: Learn and Master Trading (English) - Business Basics

hi welcome back to capex forex trading
comm in this video we're going to be
discussing the difference between two
types of spread the fixed spread and the
variable spread so every time that you
trade you will see a bid price and an
ask price otherwise known as the sell
price and the buy price depending on
which way you want to phrase it and
obviously the difference between those
two prices is called the spread so if
you're using a fixed spread broker your
spread will remain the same at all times
no matter how volatile the market is so
for example if your broker is offering a
one pip fixed spread and you're trading
$1 per pip you will need to make a one
pip move into your direction which will
equate to that one dollar in order to
break even at the same time if you're
trading two dollars per pip you still
need to make that one peep movement
which will equate to two dollars and so
on variable spread is slightly different
and many brokers actually use variable
spreads on their trading platform the
main difference here is that the spread
changes according to market volatility
so spreads can widen or become a lot
more wider when we get high volatility
and also if the market is really quiet
let's say on a Friday afternoon when
nobody is trading but during normal
trading hours when the market is at
standard volatility spreads don't really
change much but they do alter at various
times of the day now what you need to be
careful of are brokers that use these
high volatility times to hunt your stop
so for example if some unexpected news
comes out we tend to see a huge market
spike or a drop and let's say for
example we're looking at a really big
market spike at this time some brokers
will widen a spread out so much that
your stop will get taken out and they do
this because there are a very high risk
of losing money if you trade in a
correct way so here they use their
spread or the widening of the spread to
guarantee that they make some money out
of you so they will probably call this
risk management but don't fall for this
honest brokers don't do this and the
plenty of good ones around so let's look
at this example here so what we can see
is a big drop in the market that starts
from here and ends around about there so
obviously it looks like the some news
has come out of the market that's
affected the USD Japanese yen currency
pair so let's say that for the sake of
the argument we've entered the trade
here at the top of this candle our stop
loss would be just a few pips above as
normal and our target let's say is
equivalent to this low here so we
entered here our stop loss is here and
our target is here that's equivalent to
this low here now if these were true
market conditions and we've entered on
this candle here you can see that our
our stop loss has been taken out and
that's fair enough it just basically
shows that we've got the trade slightly
wrong and if we we just got into it a
little bit too early so if we waited
just a few kind of minutes after then we
would have let's say we have an entry
here then we would have made a target
quite easy however if these were untrue
market conditions and there's no reason
for the market to spike upwards here so
if we entered there we would fully
expect the market to drop to this level
here and some brokers widen their spread
so much that these unnecessary spikes in
the opposite direction
take stops out and this is where traders
can be treated unfairly and the best way
to kind of know if your broker is doing
this against you is by simply comparing
other brokerage accounts that you have
they don't have to be you know full of
money you'd have to upload loads of
funds but it may be worth getting
another brokerage account to compare the
two charts and if they don't match then
you know that your broker is hunting
your stock to take you out of the market
because that way then make more money
out of you so just be a little bit more
careful and do a little bit more
research and compare different brokers
to make sure that these spikes occur in
all of them because if they only occur
in yours then your broker is trading
against you and you need to quit that
account now to make it a little bit
easier for you on our website we've
created a list of approved forex brokers
so if you go to capex forex trading comm
and then just click this forex brokers
tab here you will see a list of approved
forex brokers now each one of these
brokers in our table has got a link to
it to open a live account or to open a
demo account so realistically it's up to
you take your pick and just find out
which broker is the right for you if
anything you know you can open an
account with any of these brokers just
for comparison purposes so then you can
compare different broker charts to the
one that you currently have so if you
have spikes occurring in the market on
your platform
it might be worth opening one of these
accounts just to make sure that they
also occur in other accounts as well
because if they only occur in yours then
you need to change your broker okay so
that concludes this lesson as usual if
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should see you for the next lesson thank
you