Only a handful of forex brokers offer fixed rate in their services, mainly because of the risk and cost that they must bear. But for traders, this feature can be very helpful.
There are two types of exchange rates system in macroeconomics over the years: fixed exchange rate and floating exchange rate. Basically, a fixed rate means that the central bank makes sure that the currency's exchange rate to another currency or the current gold price doesn't move past a certain level, so the rate is fixed. In comparison, the floating exchange rate means that the currency rate depends on the market, specifically on the supply and demand relative to other currencies.
The exchange rate can often be an issue for forex traders before they deposit or withdraw because there are a few things that must be considered.
"When is the perfect time to deposit with the best rate?"
"Does broker A have a better rate than broker B?"
"What payment method has the best rate?"
Such problems often arise among those who want to build a consistent career in trading. In other words, the exchange rate can potentially have a tremendous impact on the trading experience in general, adding more stuff to stress about.
To help traders overcome this issue, some forex brokers came up with the idea of offering a fixed rate for deposit and withdrawal. With this facility, traders don't need to worry about getting bad exchange rates because of their terrible timing when funding their trading accounts. However, there are also some downsides to this feature.
Fixed Rate in Forex Brokers
In forex trading, deposit and withdrawal are two crucial things for many traders and they can affect traders' overall opinion of the broker. That is why many brokers try their best to improve their deposit and withdrawal service, in which a fixed rate can be offered as one of the solutions. With fixed rate feature, traders don't need to worry about the fluctuating exchange rate between their currency and the account's base currency.
Just imagine you want to deposit $100 in your account. When the exchange rate of USD/SGD is at Rp1.33, you must spend SGD133. At another time, when you want to deposit another $100, the exchange rate may have risen to SGD1.40, so you have no choice but to spend SGD140. That is why, in this situation, traders must calculate the rate from time to time in order to get the best deal at the right time. However, you can scratch that from your to-do-list if your broker has a fixed rate feature going. Let's say the broker decided that the exchange rate is at SGD1.35 and you want to deposit $100, then you need to prepare SGD135 at all times, no matter how big the price change in the market.
See Also: Lowest Deposit Forex Brokers
From the illustration, above, we can see that fixed rate can be very beneficial for many traders regarding their deposit and withdrawal activities, especially if their currency tends to be highly volatile and prone to extreme changes. However, by using this feature, there will be no benefits from higher withdrawal rates.
Fixed Rate vs. Fixed Spread
Fixed rate is different from fixed spread. Fixed spread essentially refers to the spread charged for every transaction, while fixed fate only applies to the deposit and withdrawal transfers. Not all brokers with fixed spread feature fixed rate and vice versa.
However, some brokers actually charge a "spread" for deposit and withdrawal activities. Let's say the broker decides that the deposit rate is SGD1.33 and the withdrawal rate is SGD1.35. The SGD2 difference means that you must pay an SGD2 spread for every deposit and withdrawal roundabout, multiplied by the size of funds involved in the two transactions. The situation will be different if the broker offers a fixed rate feature because, in this case, the deposit and withdrawal rates are always the same. That means the spread is always at SGD0 because there's no difference between the deposit rate and the withdrawal rate.
Brokers Offering Fixed Rate
Despite its benefits, it is unfortunate that not many brokers offer a fixed rate for their clients. Usually, it is being provided by DD and STP brokers that operate under offshore regulators. The reason is it might not be as beneficial for brokers because they have to bear a higher risk when the exchange rate is unstable, increasing the broker's chance to go bankrupt from covering traders' losses in exchange rates.
Still, a few brokers have managed to provide fixed rate based on its attractiveness to new clients. Here are some of them that you can consider:
1. FBS
FBS is a globally recognized broker with a fixed rate feature available for all clients worldwide. The broker has a high reputation due to its compliance with two regulators; IFSC Belize and CySEC Cyprus. Since its first launch in 2009, FBS has earned many traders' interest. Their fixed rate is offered along with other services including fast response customer support, Islamic account option, bonuses, promos, and low spread trading in various types of accounts.
Since 2009, the action of FBS Holding Inc. or known as FBS in the world of forex trading has been recognized by various international institutions. With clients reaching 14 million as of 2019, FBS has received the title of Most Transparent Forex Broker 2018, Best Investor Education 2017, Best Customer Service Broker Asia 2016, IB FX Program, and many others.
FBS is regulated by FSC Belize and CySEC Cyprus. This broker has been trusted by millions of traders and 370 thousand partners from various countries. Based on their data, FBS garners about 7,000 new traders and partner accounts every day. And, 80% of the clients stay in the FBS for a long time. No wonder the broker is growing rapidly due to the incredible growth in the number of clients.
Trading products offered by FBS range from forex, CFD, precious metal, and stock. For forex trading, CySEC-regulated FBS offers leverage up to 1:30 on Cent and Standard Accounts. Clients who want to try higher leverage than that can alternatively register an account under FBS Belize.
FBS spread begins from 0.5 pips for Pro account type and from 0.7 pips for Standard and Cent accounts. On a standard account, volume orders can be made from 0.01 to 500 lots. Therefore, this account is recommended for experienced traders.
Whereas on Cent Accounts, volume orders can be carried out with a maximum of 500 cent lots or the equivalent of 5 standard lots. Cent Accounts involve a different level of risk. FBS recommends Cent Accounts for beginner traders. All account types support the following trading instruments: 36 Forex pairs, 8 metals, 3 energies, 11 indices, 127 stocks, 5 crypto pairs.
Before plunging into the real forex market, traders can practice with FBS Demo Account which consists of two types, i.e Standard and Cent.
FBS uses the MetaTrader 4 and MetaTrader 5 platforms. They offer them on Windows and Mac as well as Android and iOS mobile. These platforms provide a trading experience at traders' fingertips, allowing traders to progress as a trader anywhere at any time.
MetaTrader platforms also have a variety of mainstay features, including the possibility to create, buy, and use expert advisors (EA) and scripts, One-click trading and embedded news, technical analysis tools, the possibility to copy deals from other traders, hedging positions, and VPS service support.
Another advantage provided by FBS is a deposit bonus of 100% for clients who fulfill certain requirements. The process of FSCing and withdrawing funds can be run easily and quickly. Based on clients' testimonies, each process usually takes no more than 3-4 hours, except on holidays.
Traders also have the opportunity to develop a side business when trading with FBS, namely as an Introducing Broker (IB) or Affiliate. The FBS partnership system provides partner commissions that are already in 3 level positions. Only by introducing new clients to FBS according to certain procedures, traders can earn extra income.
Traders will also get trading education experience at FBS. They have prepared a comprehensive forex course. The course consists of 4 levels: beginner, elementary, intermediate, and experienced. Traders can take courses that will turn them from newbies to professionals. All materials are well-structured. Besides, FBS provides various forex analyzes, webinars, forex news, and daily market analysis that can be accessed easily on their site.
Traders can access the FBS website with many language choices. Of course, this will increasingly provide comfort for traders. Available languages include English, Italian, French, Portuguese, Indonesian, Spanish, and others. Live chat support is also provided 24 hours 7 days a week.
In conclusion, FBS is a widely known broker among retail traders around the world. It continually grows to become a preferred broker because of flexible trading conditions that enable its clients to trade with various instruments, low deposit, and other trading advantages.
2. FirewoodFX
FirewoodFX is a forex broker established in 2014 and is currently under the regulation of St Vincent and the Grenadines. Although the broker is considered relatively new compared to its competitors, FirewoodFX offers simple trading conditions that are easy to understand for beginners. FirewoodFX offers the top-rated trading platform MetaTrader 4 that can be accessed via desktop, web trading, and mobile app. Other than that, the broker offers a fixed rate feature in their deposit and withdrawal service. This feature is available in Micro account which only requires a minimum deposit of USD10 USD. This way, traders can enjoy the fixed rate benefits by trading in small lot size (starting from 0.01 micro lot) and high leverage of 1:1000.
3. Monex
In contrast to the previously mentioned brokers, Monex Investindo Futures is a broker originated from Indonesia which operates under the regulation of BAPPEBTI since 2000. This broker is known to give their best service for all clients by providing competitive trading conditions. One of the most popular facilities is fixed rate to help their clients avoid risks and difficulties during market's extreme volatility that may affect the exchange rate between the US Dollar and Indonesian Rupiah.
Conclusion
While forex trading can bring a generous amount of profits to traders, it can also be disastrous for them who prefer to frequently deposit and withdraw their money from time to time. The floating exchange rate system makes their transactions prone to high spreads that cost a lot of money when summed up together. It can eventually lead them to carefully choose the right time to deposit or withdraw from their trading accounts; creating a difficulty that can be avoided completely with a fixed rate. In this case, forex brokers offering fixed rate can be a good answer to end that problem.
5 Comments
Feb 25 2023
Dude, I'm a bit confused as to whether to choose fixed or floating rate for my trades. So no matter what happens, I will always deposit at the same exchange rate. Variable interest rates, on the other hand, can cost a lot of money to actually deposit, as exchange rates can fluctuate a lot. But on the other hand, when making withdrawals, a fixed interest rate can actually be a disadvantage because you can withdraw at a lower interest rate and have less money. When you withdraw at a floating rate, you get more money because the exchange rate is higher.
What factors should I consider when choosing a rate? Which one is actually better for beginners?
Feb 25 2023
Bernardo: When choosing a rate in forex, I think there are factor that you should consider to make the decision.
With fixed rate, you dont need to wait the rate become lower to deposit in trading. And you dont have to wait the rate become higher to withdrawal. So, you can do the trading with more faster without need to be afraid of floating rate currency.
So it is bascially suit for beginner!
Feb 25 2023
Let's have a chinwag about this fixed spread the author's talking about. Fixed spread is like a fixed rate, isn't it? Because according to the article, the fixed spread won't budge even if the market moves, so you can charge a fixed spread and trade without worrying about ever-changing fees.
But I'm properly confused why fixed spreads always seem to be higher than variable spreads, and most variable spreads start from zero! And why does it seem that fixed spreads offer lower commissions?
Feb 25 2023
Marc: This is because of the broker's profit. As you know, the broker's profit comes from spreads and commissions. So, when the spread is lower, you have to charge a higher commission, or conversely, when you charge a higher spread, you have to charge a lower commission. Because when the two fees are higher, it can burden the seller and the seller will feel the fees are very expensive. SO, the broker needs one of the higher fees and the other lower to make the trader feel that the trader's fees are not expensive and that the broker can balance their operating costs. So don't be confused if zero spread can be offered higher commission.
Feb 25 2023
G'day mate, I reckon I understand about the fixed rate and how it can help us avoid those pesky fluctuations that might mean we need to top up our deposit or end up with more than we bargained for. But here's the sticky wicket: what happens when we're using a broker that's not in our neck of the woods and they're using a different currency? For instance, I'm from Indonesia and I've got IDR, but I want to deposit with an Australian broker who uses AUD. So, basically, the AUD gets converted to USD for trading. But in the meantime, I'm depositing IDR into AUD, and then the AUD gets converted to USD. Which fixed rate do I get? Is it the IDR to AUD or the AUD to USD? Sorry for my English, mate.