What should a trader make of a large spread relative to a small spread? In other words: What does the size of the spread signify about the currency pair? Thank you.
Size of the Spread indicates the liquidity in the pair, a larger volume of activity will signify a more liquid pair.
ie: The EURUSD is the most traded pair in FX and hence, generally has the lowest spread. The majors in general have the lowest spread of all the pairs available to trade. You should search for others that have favourable spreads such as EURAUD but this will more than likely be broker dependent…
Exotics, say pairs such as the EURNOK, EURSEK etc. have a lot less activity and the spread is quite wide.
The broker/liquidity provider can control the spread to include commissions, fees etc. so every broker has varying spreads.
Hope this is of help…
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Very Intelligent Question.
The size of a spread tells you
- if you enter when there is a LARGE SPREAD, say … Monday Morning and it went from 2 pips to 20 pips.
this should say to you that the brokers understand that the markets are more volatile now and there is more risk on their part, that’s why they spread the spreads out
An example would be to watch the spreads on Non Farm Payroll
another good example would be bitcoin (now there’s a topic for you… hehe i mean… what… 90 pip spread) think about it
- From your point of view, you should exercise caution,
if you’re not confident, stay you of it
if you’re confident or possibly scalping, and you have experience, sure… give it a go, but risk is increased. so it would be advisable to lower lot size when doing so
but the direct answer is…
Volatility and risk are increasing/rising
Good question mate. Spread is the most important and powerful element in forex business. To do profitable trading it is very important to understand the size of spreads. The liquidity of currency pairs mainly indicate the size of spreads. The answer of your question is larger volume spreads indicates more liquidity in currency pairs. The less powerful currency pairs has the wide activity spreads. Most of the trading broker plays with this spreads to get more commission from their trader.
Usually when a broker increases their spread indicates either something dramatic happened in the market and they want to limit their risk exposure to that event or there is low volatility for currency pairs you are trading.
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Alright, who flagged the post (above) from Butter_Kiss, and why?
Here’s the post, which is currently “hidden”.
Tell me what’s objectionable about that post.
And who are the self-appointed forum police who take it upon themselves to delete other people’s comments?
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Its a good question. I know who it isn’t.[quote=“philip338, post:1, topic:131629”]
In other words: What does the size of the spread signify about the currency pair
[/quote]
Liquidity and risk. Lower liquidity higher risk = wider spreads. Wider spreads no trade time.
I know another who it wasn’t , Clint maybe ask the mods…
I’m not the one with form for bashing newbies around here.
The post was copied from a dailyforex article. 
I’m not sure if I can post the link but you can Google it.
So, now we know the answer to that question.
The fact that that one short comment was recognizable on another forum, is very impressive to me lol wow