Is it true that OANDA offers tights spreads? This article will not only explore OANDA's spreads but also the pricing and the Depth of Market.

OANDA is one of the foremost forex brokers in the world that offers competitive pricing to its clients. One of the major ways it offers competitive pricing is through its tight spreads. OANDA offers two pricing options namely spread-only and commission plus core spread. This means OANDA employs clear and transparent pricing models as traders can either opt to pay the spread via OANDA's spread-only pricing option or take advantage of the commissions model to access lower spreads. How so?

OANDA Tight Spreads


How Much are OANDA's Spreads?

With the spread-only pricing, the commission has been integrated into the spread offered by the broker so the only cost that the trader will be paying is the spread. For the commission plus core spread pricing, traders gain access to an even better spread relative to the spread-only pricing. Traders only have to pay a fixed commission on each trade. The total cost for each trade is the addition of the commission and the appropriate core spread. The core pricing spreads begin from 0.1 pips while a commission of $40 is charged on every million USD traded.


How does OANDA Set Its Pricing?

In terms of how OANDA derives its pricing, it is seen in the financial instruments the broker offers and this is discussed below.


Forex and Metals CFDs

The pricing for forex and metals CFDs is derived from the liquidity providers used by OANDA. They are essentially large financial institutions that provide the broker with available spot pricing for FX pairs and metals. OANDA uses various groups of liquidity providers to generate pricing for different financial instruments.

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Traders looking for brokers with accurate precision, OANDA can be an option. That is because OANDA is a broker that provides quotes with 5-digit accuracy and active price movements that follow market developments. Order execution speed is also faster in this broker.

It provides benefits for novice traders, as they can trade with smaller volumes using the calculation system based on currency value, unlike other brokers adopting the lot system.

Founded in 1996, OANDA was built by Dr. Michael Stumm who is a lecturer in Computer Engineering at the University of Toronto, Canada, along with his colleague, Dr. Richard Olsen of The Olsen Ltd., which is one of the leading econometric research institutes. They have a head office in San Francisco, United States.

OANDA branch offices can be found everywhere. Some of these offices are located in the United Kingdom, Singapore, Japan, and Canada. With this number of offices spread, OANDA has increasingly attracted the attention of clients worldwide.

OANDA's company is registered under several well-known jurisdictions in financial trading. They are regulated by CFTC and NFA in the US, FCA in the UK, ASIC in Australia, and many others. Traders do not need to worry anymore about security when trading in OANDA. However, these advantages make trading rules at OANDA more stringent compared to other brokers.

For example, OANDA only allows maximum leverage of 1:20, because the rules in the US and Japan do not allow leverage above that. Besides, the registration procedure is more complex due to various additional requirements that are not submitted by other forex brokers. On top of that, hedging is not allowed in one trading account as the client must open an additional account to hedge.

Nevertheless, OANDA is known for being a leading broker with many advantages offered. OANDA faces increased market risk during periods of price volatility, such as economic and political news announcements. When market spreads increase or decrease, their pricing engine widens or narrows spreads accordingly. That way, traders can get the latest conditions from price movements in the market more quickly.

Prices move very fast in the market. Especially when news releases have a large impact on market volatility. This condition is often exploited by brokers to take advantage of clients with Requotes. However, traders do not need to worry about additional costs when trading with OANDA.

The company never withdraws Requotes so traders can get maximum profit. When traders are unavailable to monitor open positions, they can set take profit orders to lock in profits and Stop Loss orders to help protect against further losses.

As an experienced and well-known online forex broker, OANDA is committed to maintain an efficient trading environment that reduces latency and provid tools to help clients manage the degree of acceptable slippage.

With a fast & reliable trading platform by OANDA, clients' trades are executed in 0.012 seconds. This suits traders who choose brokers based on execution speed.

Because of this exceptional execution service, it is not surprising that OANDA won many awards, including the winner of the world's Best Retail FX Platform at the prestigious e-FX awards. The broker is also voted number 1 for Consistency of filling trades at quoted prices, Execution speed, and Reliability of platforms.

There is no minimum deposit or minimum balance required to open an OANDA account. Deposit and withdrawal can be done easily. OANDA provides a variety of payment method facilities, including Paypal, Wire Transfer, Credit Card, and Debit. Traders can adjust it to the region where they live.

OANDA provides more than 100 trading instruments, including 71 currency pairs, 16 indices, 8 commodities (Brent Crude Oil, Copper, Corn, Natural Gas, Soybeans, Sugar, etc.), 6 Bonds, and 23 Metals.

The fxTrade and MetaTrader platform are available at OANDA. These platforms can be used for Desktop and Mobile. Another plus is they have an OANDA Technical Analysis that exists in collaboration with a technical analysis provider called Autochartist.

With these platforms, clients can monitor price movements easier and automatically recognize patterns created on charts, as well as receive alerts when the awaited patterns appear. Access to this technology can be enjoyed free of charge.

In conclusion, OANDA is an ideal broker for traders in need of fast execution backed by many years of experience. The company is also a good alternative for those looking for a well-regulated broker with flexible trading and deposit conditions.


Indices CFDs

OANDA calculates pricing for its indices CFDs by referencing a combination of the relevant futures prices and the 'cash' or 'spot' prices with regard to the underlying financial instrument. The broker then makes modifications such as adding its own spread while taking into account differentials in currency exchange rates, liquidity in external markets, and other pertinent factors. Modifications can also be made to show market movement after the payment of dividends and other expected corporate actions.


Commodities and Copper CFDs

OANDA prices of commodity (including copper) CFDs are determined by underlying futures contracts. This means that when an underlying futures contract is about to expire, the broker calculates the basis rate, which is a representation of the price difference between the futures contract that is about to expire and the next futures contract.

From that point forward, OANDA calculates its CFD price as the current value of the price of the next futures contract with the basis rate used for calculating the current value. The calculation of the current value is done continuously on a second-by-second basis. As a result, whenever the basis rate is positive, the CFD price is likely to move in an upward direction toward the contract price. But when the basis rate is negative, the CFD price will likely move downwards in the direction of the contract price.


The Final Touch

These methods of deriving prices across different classes of financial instruments enable OANDA to offer tight spreads but most importantly, this is made possible through the Depth of Market (DoM). Depth of Market is a feature that is native to the MT5 and cTrader platforms, but OANDA also offers it as one of its premium tools on its platform. The Depth of Market has the following benefits:

  • Trading large sizes in a single transaction.
  • Placing pending orders directly in the Depth of Market window.
  • Spreads for normal trade sizes begin from 1 pip on EUR/USD.
  • The bid and ask prices are readily seen for the available liquidity.
  • Full transparency of pricing and spread.

To access the Depth of Market on MT4, go to the mini terminal app and click on the spread on the mini terminal order ticket. It should be noted that the DoM feature is not accessible on the standard MT4 order ticket or the mobile version of MT4.

Once the number of lots is entered on the mini terminal order ticket, the buy and sell prices at the top of the ticket will be updated dynamically so that the trader can clearly see the entry/closing price along with the spread for the number of lots requested.


Bottom Line

From tight spreads to the Depth of Market, it's clear that OANDA puts a lot of effort into providing the best trading conditions so that traders can maximize the profits from their trades while reducing the cost of these trades. For more details on how OANDA applies its fees, see Beginner's Guide to OANDA Fees.