Insider’s Guide to Forex Trading:

This pip spread on every trade is a commission. That’s what it is. Despite what the broker might claim. And that forced pip spread is not cheap. 3 pips spread is $30 on a just one full sized pair. Try $50 on a 5 pip spread you still see as commonplace.

You have a $5,000 account and trade it with 200:1 leverage. That means you can trade 1,000,000 worth of currency (you can see why we said pip spreads above are a significant cost but with leverage can end up being a small percentage of cost) – and that means 10 full sized pairs.

Find a broker that does not charge high pip spreads. Sure, you need a broker who provides a stable platform, which provides good customer service, which is regulated (important!), that has account insurance/guarantees, and so on. But realize these brokers make money
many different ways. They make pip spread money, they make money by laying off orders on other banks, they make money on stop running. Did I say that? Guess it’s too late to take it back.

There is simply no reason to pay more than 3 pips spread on the EURUSD. And really, you should be paying 2 pips spread. On the GBPUSD and USDCHF why are you paying 5 pips spread Sorry, it’s not going to a charitable cause – your broker’s bank account isn’t a non-profit. Those pip spreads are crazy. You should pay 3 pip spread, maybe 4 pip spread at most on the other majors.

And forget about all the “exotics” – avoid trading anything that is not amongst the main pairs – EURUSD, USDCHF, GBPUSD, USDCAD, AUDUSD, USDJPY, EURJPY and maybe EURGBP. And stay away unless is 2 or 3 pips spread, maybe 4. That’s already more than enough to trade so why do you need to trade the GBPCHF for 15 pips spread? Unless you really like to make car payments and pay for rounds of golf for your broker. If you do see a compelling reason to trade, for example, the GBPJPY - and there are some great moves there - just be sure you are building the spread costs into your trading outcomes – you might need it to go 7 to 10 pips spread just to get break-even, let alone to start making a profit.

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