Tight spreads – Why are they so important?
The spread of the bet is the difference between the market price and the rate the broker is making the spread available at. Its an important decision in deciding which platform you want to trade from. Many spread betting companies have different spreads for different indices, stocks and commodities. These can vary on on each class so usually you will find that one broker is tighter than another on only some of the spreads. This is why is can be beneficial to trade with more than one broker. If your trading volumes are large you may be allocated an account manager and sometimes they may be able to tighten the spread on individual classes or shares, but you will have to trade in high volumes to be able to command this from your broker. A broker will usually try to win your business by marketing tight spreads on a few of its main classes but then have have higher spreads on other classes. The spread can also change when outside of normal trading hours and become larger.If you only trade a few indices and FX pairs, then go with the broker who will give you the lowest trading costs and have back up accounts for other markets and classes. Tight spreads are usual found on indices and commodities and are higher on individual stocks and shares. Remember, when you buy or sell the broker is borrowing shares in order to balance their risk, so whether you win or lose the broker will like you and want to trade with you. The tighter the spread the better it is for your trading efforts and you your day trading will most probably become more profitable as each pip is closer to profit for you the trader.