I wanted to take the time to talk to you about what you need to know about fixed spreads and variable spreads. When you’re looking at a broker, it is important to understand this concept. It is important because it can end up costing you money over time.

Basically you have two types of spreads; variable and fixed. There is a debate about which is better among the traders out there, so I’m just going to show you the facts and you can come up with what works best for yourself.

Variable spreads means there you’re going to have the difference between buy and sell prices fluctuate for a particular pair of currencies. What happens is if there is a more volatile period, your broker will actually widen this spread. The spread at its smallest during the more calm and inactive times.

Fixed spreads are just fixed. It doesn’t matter what time of the day it is or how volatile it is. You’re going to have a spread of roughly 2 or 3 pips for a typical pair of currencies.

Basically when you look at them both, if you’re using a fixed spread, you’re sort of paying more during the inactive times and less during the more volatile times. I guess what you determine to use should reflect the type of trading you do. If you’re someone that traders in the evening after work when it isn’t busy, you could probably get away with a variable spread. If you’re someone that is going to do this during the more busy times of the day, than fixed would probably work for you.