Brokers With Fixed Spreads

Brokers can offer a fixed or variable spread; one that can vary depending on market conditions and one that cannot. Many traders, including beginners, opt for fixed spread brokers so they know exactly what their trading costs will be. This guide will go over what fixed spreads are, their pros and cons, plus how they compare to other pricing models. We have also compiled a list of the best brokers with fixed spreads in 2024.

Fixed Spreads Explained

Spreads refer to the difference between the ask (buy) price and the bid (sell) price of an asset, such as a forex pair. Brokers usually add a mark-up to the spread, enabling them to turn a profit. Brokers also make money in other ways, including through commissions (which we explore in more detail below), but the spread is a standard trading charge.

As the name suggests, brokers with fixed spreads offer a static, predetermined cost to trade, such as 2.0 pips on the GBP/USD pair. This provides investors with upfront price transparency, who will only pay the price quoted.

Variable spreads, on the other hand, can change depending on market conditions. This means that if the market is more volatile, the spread could widen. As a result, a variable spread on the EUR/USD pair might range from 1.0 pip to 3.0 pips.

InstaForex Fixed Spreads

Fixed spreads are usually offered by brokers operating a Market Maker (MM) model, whereas trading platforms offering variable spreads tend to follow a Non-Dealing Desk (NDD) model.

With the Market Maker model, brokers with fixed spreads will typically buy large positions from Liquidity Providers (LPs) and then break up the asset into smaller pieces to sell to traders over a dealing desk, giving them more control over pricing. The downside is that fixed spread brokers are not always cheaper than platforms with variable spreads, which might offer a better deal under the right market conditions.

Example

Trading results with variable spreads:

• An investor trades the FTSE once per day at £6 per point
• The spread is advertised on the broker’s website as ‘from 1.5’ but when the investor trades it averages out at 2.5
• 1 trade per day, and 5 trades per week, means 20 trades per month
• 20 trades at £6 per point x a variable of 2.5 points = £300

Trading results with fixed spreads:

• The investor still trades the FTSE once a day at £6 per point
• The broker advertises a fixed spread of 2.0 points (so it will remain that price)
• The investor still makes 20 trades per month at £6 per point x a fixed spread of 2.0 points = £240
• The investor saves £60 per month

Note, this example is for illustrative purposes only.

Pros Of Fixed Spreads

• Transparent Trading: Brokers with fixed spreads offer price certainty. This appeals to beginners and rookie traders. It also means online brokers can’t widen spreads in their own favour to make more money from your trades. A useful tip for beginners is to consider brokers with micro accounts too. These allow aspiring investors to open accounts and trade in smaller amounts.
• Lower Rates: Choosing fixed spreads can make trading more cost-effective. With a fixed spread, you know exactly what you are paying, so you can create a budget and stick to it. Planning for costs is a key part of profit and risk management.
• No Volatility Risk: Variable spreads might seem like a favourable option under the right market conditions, but costs can quickly mount during periods of extreme volatility. Fixed spreads give you the security that you aren’t going to pay potentially high and fluctuating rates.

Cons Of Fixed Spreads

• Price: Fixed spreads tend to cost more than variable spreads. This is because trading brokers have more flexibility to adjust their floating rates based on market conditions. Brokers with fixed spreads, on the other hand, often have to take a conservative approach when setting fees.
• Requotes: Requotes are common with fixed spread brokers. If your broker is using an instant execution model then they may requote you based on the current market; you can choose whether or not to accept the new quote, but declining means you could miss out on the trade.
• Slippage: Slippage can also occur. This is when the broker is not able to execute the trade at the price that was originally quoted. Slippage is essentially the difference between the requested rate and the executed one.

Spreads Vs Commissions

Commissions are often tied to spreads and together they paint a full picture of trading costs. Commissions are essentially a fixed cost applied on top of the spread and are charged whenever you buy or sell an asset. They are normally a flat fee, displayed as a percentage or per round lot turn.

Importantly, brokers with ‘commission-free’ trading may charge wider spreads to compensate for the loss of the income stream. Equally, some brokerages charge tighter spreads, close to zero pips, and then apply a higher commission. As a result, traders should compare both spreads and commissions when choosing a broker.

Choosing Fixed Spread Brokers

If you decide that you want to trade with fixed spreads, then it’s time to choose a broker. Key factors to consider include:

• Fixed Spreads – does the broker offer competitive, fixed spreads on popular assets? The best fixed spreads broker offer spreads under 1 pip on major forex pairs, for example. Also compare any commissions.
• Regulation – check that the broker holds a license with the UK Financial Conduct Authority (FCA). Brokers regulated offshore do not offer the same level of client and fund protection to British investors.
• Minimum Deposit – what is the minimum amount you must deposit to open a live trading account? Beginners may want to open an account with a low deposit brokerage.
• Trading Instruments – does the broker offer access to the markets you wish to speculate on, for example, major and minor forex pairs, precious metals like gold and silver, energies such as crude oil and gas, plus cryptocurrencies like Bitcoin?
• Trading Platform – what platform does the broker use? MetaTrader 4 (MT4) is a good option for rookie traders. Also check there is a free investing app available on mobile devices.
• Withdrawal Time & Fees – are there any fees for withdrawing profits? Also, what payment options are supported? Note, some firms require that you withdraw funds using the original deposit method.
• Customer Support – does the broker operate a responsive customer service team available during trading hours? Can the team advise on questions about fixed spreads and other fees?

Best Brokers With Fixed Spreads

This review considers not only the brokers with the lowest fixed spreads but also other trading conditions. This means that, while some of the trading brokers listed below might not have such narrow fixed spreads, they rank highly in other areas.

AvaTrade

AvaTrade is one of the top brokers with fixed spreads. AvaTrade offers fixed spreads on forex, indices, stocks, commodities, cryptocurrencies, options, ETFs and bonds. Fixed spreads on forex start from 0.9 pips on retail accounts and 0.6 pips on professional accounts. Fixed spreads are offered on MetaTrader 4 (MT4), MetaTrader 5 (MT5) and AvaOptions.

The brand is regulated by multiple financial agencies, including the Financial Conduct Authority and the Central Bank of Ireland.

The minimum deposit to start trading is £100, accepted via bank transfer, credit card and PayPal.

AvaTrade allows both scalping and hedging.

easyMarkets

easyMarkets offers fixed spreads on forex, cryptocurrencies, shares, options, commodities and indices. Spreads vary depending on which platform you are using; they start at 0.7 pips on MetaTrader 4 and 0.8 pips on the broker’s in-house terminal.

easyMarkets is regulated by Cyprus Securities and Exchange Commission, the Australian Securities and Investments Commission, plus the British Virgin Islands Financial Services Commission, among others. Negative balance protection is also provided.

The minimum deposit is £25, and payment can be made via bank transfer and credit card. PayPal and other digital wallets are not supported.

Hedging and scalping are both allowed.

City Index

City Index is an industry leader for spread betting due to its competitive fees in over 12,000 markets. The company offers fixed spreads on indices, commodities, bonds and interest rates. The minimum spread on the UK 100 starts at 1 point and on sugar, it is 0.06. Available platforms for fixed spreads include MT4 and WebTrader.

The firm is regulated by the Financial Conduct Authority. City Index also has an impressive range of educational tools, including video tutorials, webinars, and online articles.

The minimum initial deposit is £150. Withdrawals and deposits are fee-free.

Bottom Line On Brokers With Fixed Spreads

Brokers with fixed spreads provide traders with price transparency. Investors know up front how much a trade will cost, making it easier to manage budgets and calculate profits. But importantly, spreads should also be compared alongside commissions and due to requotes and slippage, brokers may not always execute trades at the advertised price.

See our list of the best UK brokers with fixed spreads to start trading today.

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