Raw Spread or Standard Forex Trading Account Which Is Better for Scalping?
If you are comparing the 2 accounts at the same broker only, then in most cases, Raw accounts will have lower cost of trading than Standard spread only accounts. It is the same with IC Markets.
But there is a lot of hogwash around the Raw spreads. You have to calculate the actual cost of trading. If you add up the commission, the cost is not that low at all.
Let us take this example broker's Raw spreads type account.
a. They charge $3 commission per lot, per side (screenshot 1). That's $3 for opening the trade & $3 for closing it. Note: this is for 100,000 units or 1 Standard lot.
This means, if you are trading 1 Mini Lot, this will be $0.6 Roundturn commission straight.
b. Now, let's talk spreads. Assume for a moment, there are no spreads charged at all on average (screenshot 2), even though there is, but let's just say there is no spreads charge at all.
What is the total trading cost here for trading 1 Standard Lot on EUR/USD?
Commissions + Spreads
$6 + $0 = $6 per 100,000 units on trading EUR/USD
Is this very low? No. It is decent.
You can easily find brokers that offer 0.6 pips spreads with Pro Accounts, without any commissions.
And some low cost regulated brokers charge overall 0.3 pips spreads on EUR/USD, that's $3 per 100,000 units.
So, I don't think just comparing the account types is a good comparison. Think of the overall cost you will pay to trade. Is it low? Can you trade the exact same instrument for lower brokerage cost with another regulated broker, regardless of fact if it is Raw spread account or not?
If you are comparing the 2 accounts at the same broker only, then in most cases, Raw accounts will have lower cost of trading than Standard spread only accounts. It is the same with IC Markets.
But there is a lot of hogwash around the Raw spreads. You have to calculate the actual cost of trading. If you add up the commission, the cost is not that low at all.
Let us take this example broker's Raw spreads type account.
a. They charge $3 commission per lot, per side (screenshot 1). That's $3 for opening the trade & $3 for closing it. Note: this is for 100,000 units or 1 Standard lot.
This means, if you are trading 1 Mini Lot, this will be $0.6 Roundturn commission straight.
b. Now, let's talk spreads. Assume for a moment, there are no spreads charged at all on average (screenshot 2), even though there is, but let's just say there is no spreads charge at all.
What is the total trading cost here for trading 1 Standard Lot on EUR/USD?
Commissions + Spreads
$6 + $0 = $6 per 100,000 units on trading EUR/USD
Is this very low? No. It is decent.
You can easily find brokers that offer 0.6 pips spreads with Pro Accounts, without any commissions.
And some low cost regulated brokers charge overall 0.3 pips spreads on EUR/USD, that's $3 per 100,000 units.
So, I don't think just comparing the account types is a good comparison. Think of the overall cost you will pay to trade. Is it low? Can you trade the exact same instrument for lower brokerage cost with another regulated broker, regardless of fact if it is Raw spread account or not?
But I look at Raw Spreads from the angle of certainty. At least there's some certainty that the spreads will not be widened considerably after I have already opened a trade.
For example the broker Just Markets widens their GBP/USD spread as high as 2.5 pips during so called volatility.
But with Raw Spreads don't you think there's a level of certainty that you still get low spreads no matter how volatile the markets are?
But I look at Raw Spreads from the angle of certainty. At least there's some certainty that the spreads will not be widened considerably after I have already opened a trade.
For example the broker Just Markets widens their GBP/USD spread as high as 2.5 pips during so called volatility.
But with Raw Spreads don't you think there's a level of certainty that you still get low spreads no matter how volatile the markets are?
Raw spreads don't mean 0 pip spreads or Fixed spreads. With Raw spread account, the brokers still charge you 'variable' spreads.
Please see the attached screenshot. With highlight on the word 'average'. It by no means is the 0.1 pips all the time. It is variable & can be much higher depending on the market conditions.
During ideal conditions it is $7 ($3.5 commission per side) + $1 (0.1 pips spreads) on EUR/USD. That makes it $8, or equivalent of 0.8 pips spreads during ideal conditions.
If you are trading 1 Standard lot on GBP/USD, then the average is 0.23 pips, that makes it $9.3 ($7+$2.3) or equivalent of 0.93 spreads during ideal conditions.
If for some reason during volatile markets the spreads are higher, then your cost will be higher. So, it could be just the same as with broker you've mentioned during volatile market conditions.
I think you can find low cost fixed spread regulated CFD brokers who charge lower than 0.8 pips on EUR/USD. So, that way you know what exactly will be your cost between certain trading hours.
