Raw spread can be beneficial for forex traders, but there are some disadvantages to be considered. For that reason, you can weigh in your option by learning from these raw spread pros and cons.
If you've tried a couple of different brokers, you've probably noticed that there are so many different types of forex trading accounts. Each account was created to serve a specific purpose for a specific kind of trader. Today we're going to be diving into the pros and cons of using a raw spread account.
What is a Raw Spread Account
An account that provides low or zero spreads is referred to as a raw spread account. This indicates that there will be no difference between the price that is being given by the broker and the price that is being offered by the market for a certain currency pair.
When you open a raw spread account, the price at which you place a position will be quite similar to the price that is currently being offered on the market at that moment. A frequent name for this kind of account is an ECN account, which stands for electronic communications network account. Professional traders, who want a more accurate execution of their trades, typically choose to trade at the actual market prices with this type of account.
Benefits of a Raw Spread Account
A raw spread account is one of the most popular types of forex trading accounts on the market. It obviously has to have some serious benefits to having gotten this popular. Here are the top benefits of a raw spread account.
- Little to No Spreads
One of the main benefits and characteristics of a raw spread forex trading account is the fact that this type of account has the tightest spreads in the market. The spreads are typically 0.2, 0.3, or even 0.0 pips in liquid pairs. If you're looking to enter the market at close to the market price instead of the broker price, a raw spread account is worth it. - Scalping Heaven
Since raw spread accounts basically have no spreads, scalpers are able to earn a much higher profit than what they would've gained with a standard trading account. This is because scalping consists of opening many small trades in a short time, so spreads can accumulate to a number that affects profitability. This is why scalpers need to trade in a low-spread environment such as a raw spread account.
Drawbacks with a Raw Spread Account
Despite all the advantages, it is also important to know that raw spread accounts don't solve all the problems in the world. If they did, there wouldn't be any other type of forex trading account to begin with in the first place. Here are the top drawbacks of using a raw spread account:
- Commissions
One of the major drawbacks of a raw spread account is its commissions. While you won't get charged with high spreads, you'll still get charged a fixed or variable commission which can take a big chunk out of your earnings if you're placing too many smaller trades. - EA Incompatibility
Many forex traders these days use automated EA robots to help them perfect their forex trading strategy. However, EA robots are known to be less accurate on raw spread accounts. If you're someone who likes using EA robots, you may want to stay away from raw spread trading accounts.
Nevertheless, raw spread accounts are considerable for traders who prefer low spreads and market execution. If you're about to apply to a raw spread broker but still have difficulties in choosing the platform, learn the guide in "Which is Better, cTrader or MetaTrader Raw Spread?"
11 Comments
Nov 27 2022
With your articles on the pros and cons of raw spreads, I think raw spreads work well with swing traders. As you just said, the downside of raw spreads is that commissions and commissions are based on the number of your trades, the number of positions you open. For swing trader that seldom open many position and dont to active on market, it will be good choice to reduce fees in trading. But for professional traders I think raw spreads can be used because if they scale they know how many pips they take and of course their profits are more stable than beginner. So they can pay commission and still make more profit due to zero spread.
Jan 12 2023
Jan 12 2023
Jan 12 2023
I am always looking for a better trading method that works for me. It seems there are many types of trades, but I am interested in trading simply because I have another main job and little time to trade. I only have 3-4 hours to negotiate overnight because of my main job. My question is which trading method can be suitable for my time and about raw spread account, can this be of use to a new trader like me? Or any other trading account recommendations I could use?
Jan 12 2023
Jan 12 2023
Feb 19 2023
I'm new here, and some Forex trading terms I'm really not familiar with and a bit confused about which broker offers raw spreads. Raw spreads are really low starting from 0 pips and the article says that even 0.0 can be offered for liquid currency pairs. And actually, it is interesting since the spread is lower than standard spread that offered.
During this time, I have read about ECN brokers that also offer similar spreads. And for some reason, some people also assume that STP brokers can also offer broadcasts like this. So this confuses me, can RAW spreads be offered by both STP and ECN Brokers?
Feb 19 2023
Torino: There are little bit different between the spread that offered by both ECN and STP account. The RAW Spread indeed offered by STP Brokers because nowadays technologies allow STP Brokers can do the access to the market with very fast and with little fees. In can make them to make an spread's offer with very low fees. But, because of it too, the profit for the broker will be lower and to avoid being loss, the broker will charge more higher commission and in my opinion, the broker took the chance to profit more with round turn based commission.
Meanwhile, ECN account actually has same case too but they offered many features that is not just about the lower spread, but also Depth of Market and it is compitable for EA Trading too! And ECN account use Metatrader 5 meanwhile STP account will use Metatrader 4. That's the different
Feb 19 2023
It is very out of topic. I am little bit curious about why the Raw spread need to be in high commission? And it is really like the article said, I have checked every raw spread offered by many brokers and actually the commission is very high. Even there are commission that charged for $6 round-turn or the broker said $3 per side-turn. I mean it is very high commissions.
The question is why the brokers need to charged very high commission to the trader who use RAW Spread account? Even standard account just charged with very low commission and even 0 commission for some brokers.
Feb 19 2023
Liam:
This is because the broker's earnings have dropped significantly. Imagine if the spread is 0.02 and maybe the brokers get a profit of only 0.01 pips. And imagine if 1 pip = 10$, the profit the broker gets is only 0.1$ and for every 100 traders who will trade 1 position, the broker will get 10$.
Meanwhile, in the standard account, the number of pips usually starts from 1 pip. Imagine if the broker took a profit at 0.3 pips. And each trader, the broker will gain $3 and if 100 traders trade 1 position, the broker will gain $300! This is why the commission should be higher if the spread starts from very low
Feb 19 2023
Rio G : And I think it is very normal for brokers to get the profit from trader. Basically, the broker is offered service to connect the trader to the forex market. And it is imposibble for trader to enter the forex market without broker. Why? It is because the forex market, originally, to trade in there, you need minimum $100,000 to buy 1 lot. And most of the big trader in there are central banks, big banks, and other financial isnititute!!
And as the backfeed to the brokers that make us posibble to trade in the forex market, we will paid in form of spread, commissions and fee. SO, it is very normal if broker charge higher commission because the spread is lower and vice versa