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:
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?"