Many people who just entered the industry will get confused about so many brokers. And because they think spread is the only cost you pay when trading, they tend to search for a low spread broker. I can easily recommend you a top 5 lowest spread brokers, but, before we reached to the list, I would like you to make sure that the lowest spread brokers do the best for you. Why? Because what you paid wasn’t just spread, and the lowest spread might not as good for you as you expected.

1. DIFFERENCES BETWEEN SPREAD AND COMMISSION

There are three types of forex brokers which are Market Maker, STP and ECN. As Market Maker and STP brokers’ main income is spread, and they add spread into the quotes they get from liquidity providers, their spread is higher compared to that of ECN brokers. For ECN brokers, they offer the exact quotes received from liquidity providers, so they have to charge commission as it’s their main income.

From that, we can see that there are three factors differentiating between spread and commission.

1. Spread is Market Maker and STP brokers’ main income.

2. Commission is ECN brokers’ main income.

3. For ECN accounts, spread is nearly zero, so the main fee you have to pay is commission.

As it is too long to review all types of brokers, here I just show the list of top 5 lowest spread brokers for your consultation. If you want to learn more about them, just click on their names.

1. Exness.com

2. Hotforex.com

3. FBS.com

4. XM.com

5. FxPro.com

2. WAYS FOR SELECTING A GOOD LOW SPREAD BROKER

As there is a dozen of low spread brokers, choosing a good and appropriate one is not easy. Here I recommend some standards of good low spread brokers which you can refer.

• Regulations: Choose a broker that is regulated in your country. In the event that your country has no regulated brokers, choose a reliable and low spread one.

• Local payment systems.

• Low spread and commission.

• Perfect local supporters.

3. REASONS WHY US AND UK BROKERS’ SPREAD IS HIGHER

We know that US and UK are two largest forex markets in the world. However, their spread and commission are less competitive as they are higher than others. Before explaining the reasons, I would like to share with you the table below regards spread and regulations of top 5 lowest spread brokers.

From the table, we can see that Exness has the lowest spread; US and UK have the highest spread.

Now I will explain the reasons as followings:

With US and UK regulations, those brokers are not permitted to offer high leverage, but they have to pay regulation fee. Therefore, they have to charge more spread and commission.

So, if you are Asian scalpers, Exness is the best forex broker for you. If you are African traders, XM and FxPro are the best. If you are US traders, Forex.com is the number one. If you are European traders, XM, FxPro and Exness are perfect choices for you.

4. SORT OF TRADERS WANTS TO TRADE WITH LOW SPREAD BROKERS

Traders compose of two types which are scalpers and long-term investors. Scalpers are traders opening and closing their positions in short time, usually less than a month. Their main transaction costs are spread and commission, and they only earn some pips for each order. Thus, they prefer low spread brokers. Contrarily, long-term investors keep their positions longer. They can earn hundreds of pips per order, so they don’t care about spread and commission. But they sometimes have to pay 90% of their profit for swap as it is their main transaction cost. For them, low swap brokers will be their preference.

So in conclusion, the type of traders needs low spread brokers is scalpers.

This is the end of my article. Thanks for reading and hope you like it.