How to save costs with a cheap broker
An additional spread is added to the disadvantage of the trader. This compensates for the missing commission. This business model is unproblematic, but when choosing a broker you should make sure that the provider offers the trader favourable conditions.
In more than 7 years of experience in the financial markets, I have already tested and compared many brokers.
The BID and ASK spread in day trading plays an important role
Day trading and scalping involve high order volumes and trade frequency. The spread plays an important role in keeping costs low. It is therefore advisable to use markets and financial products with high liquidity for day trading:
- Large futures contracts (S&P500, oil, gold, euro)
- Forex (EUR/USD, USD/JPY, GBP/USD)
- Shares of large companies
Futures contracts are very suitable for daily trading if you only want to trade small market movements with high volumes. However, you need a high starting capital of several tens of thousands of euros for this financial product. Liquid currencies and indices are also suitable for trading via CFD (contact for difference). The spread is generally very low.
Personally, I recommend using American shares or large European shares for day trading. Some Asian shares have very little liquidity and it is difficult to get market data for the order book. Stocks listed on the Nasdaq are suitable for this.
Scalping is a more extreme form of day trading. Traders work directly with the order book and trade only very small movements with high volumes. I recommend using futures contracts for this purpose. All other financial products are usually too expensive for this and one does not get the transparent insight into the pricing.
Currencies at an Exness Malaysia are also suitable for scalping. Always use a commission model. Some brokers even offer a spread of 0.0 pips. With futures, the spread is generally always 1 tick high if you buy via market order. A fee is then charged per contract. This is usually as high as the tick value of the future. For a profitable trade, you must therefore make a profit of 2 - 3 ticks.
Brokers with a fixed spread
Rarely do you find the offer of a fixed spread in Forex and CFD trading. Hardly any broker still offers this account model today. The broker guarantees the client a fixed spread (fee) for each order. However, the fixed spread is always higher than a variable spread, because the broker must also be able to hedge against high volatility. Overall, offering fixed spreads is a very big problem for the broker, because he has to guarantee execution in the background and make it possible in the first place. If there is too little liquidity in the market, there will be requotes or the broker himself will make a big loss.