The narrowness of Forex spread is different for each currency pair

Spreads are set in Forex, and traders do not have to pay the spread if trading is done. Of course, the spread differs for each Forex company even in the same currency pair, but actually, spread is different in each currency pair.

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Spread is different for each currency pair

Spread is different for each currency pair

For example, the spread of one Forex company is as follows.

• US dollar / yen: 0.3 sen
• Euro / yen: 0.6 sen
• Pound / yen: 0.7 sen
• Euro / US dollar: 0.5 cents

Thus, the spread differs for each currency pair, which means that spreads are different for each currency pair handled by one Forex company. What you have to pay attention here is that there is a difference, in the case of a cross yen, its sen, if it is a currency pair against the dollar, the spread unit is cent.

Spread is the profit of Forex company

The spread is added to the rate at the moment the trader orders and quotes the target currency pair. In other words, this spread is also the profit of the Forex company, for example, if the spread of the dollar is 0.3 something, if a trader orders a dollar yen and makes a contract, it means that the Forex company will have a profit of 0.3 sen. However, since Forex often sells 10,000 currencies, 0.3 sen of 10,000 times, 30 yen will be the profit.

However, the difference in spread depending on the currency pair is influenced by liquidity and trading volume. The spread is determined by the financial institution of the interbank market, and decided by the amount of sale and purchase of the currency pair. There are many people who buy and sell currency pair with a lot of trading volume, even if the spread is small, so even if the spread is narrow the profit will be sufficient. Conversely, the spread of currency pairs with a small amount of transactions should be widened and secure profits accordingly.

Furthermore, the spread is also determined depending on how much it costs to the currency pair, and currency pairs with lower costs can narrow the spread.

For example, if you buy a dollar yen, you can buy a dollar by selling yen. If you buy a Euro dollar, you also buy a dollar by selling the euro. On the other hand, if you buy a Euro yen, sell a yen buy a dollar, that dollar will be sold and buy euro. Since the base currency will be US dollars, it will always go through US dollars in trading, and the pair of currencies that does not include the US dollar will be costly to buy and sell.

Because of this, it is necessary to sell and buy as many times as a currency pair like a cross yen, it will be costly and spread widens.

Some Forex companies offer accounts with zero spreads. In Forex companies with zero spread, the profit will be zero. However, in such cases, there are many cases a fee is charged, for example, you charge a commission of hundreds of yen in 10,000 currency trade. Whether the zero spread or narrower is better, you will get an answer if you don’t try to calculate the cost of each trader in a currency pair.

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