What is Spread in forex market?

This is a question that most of the beginners ask, the answer is here. Spread is actually a difference between the buying and selling price. When you are going to buy the Eur/Usd currency pair, then the buy price will be different from selling price, that difference is actually spread. 

Some brokers offer fixed spread and most of the brokers offer floating spreads. If the spread is fixed then it is good, because it will not change while market fluctuates, but if the spread is floating then it will be very much difficult for some kind of traders who think that they will earn with small accounts, their accounts may wipe out. 

Spread between buying and selling price is 0.9 pips

Floating spread starts from 0 pips, but sometimes it widen up to 70 pips, that is enough to wipe out a small account, if there is a trade opened in an account and market fluctuate or any kind of rumor hover in market. Just like some times ago, it happened with Usd/Chf pair, at that time market fall terribly bad and it caused bankruptcy for so many institutions. So, if institutions may bankrupt then small traders will not sustain in market. You are thinking that if the market fall, then what is the matter of spread in this? Ok, let me explain you. When the rumor hover about swiss franc at that time, then suddenly the traders saw wide spread in their meta trader, and most of the brokers stopped trading in this pair, this is practice of market that when they see that there might be a sudden fluctuation in market, then they stop trading that currency pair, as I saw this thing in Russian Ruble, Swiss Franc and Britain Pound cases.

So, whenever you choose the forex broker, then you need to see that what kind of spread they are offering, what is spread, if fixed or floating? What meta trader they are using? I hope you will understand these terms when you get familiar with market.

Type of Currency Pairs in international forex market

In this post, I will tell you that what is currency pair and what we call the currencies in pair. There are two kind of currencies that traders trade in market, one is base currency and other is counter currency, for example, if you are buying any currency like Euro, then in forex market, the Euro will be base currency and the Dollar will be counter currency. That pair is also written as Eur/Usd. In forex market, the most famous base currencies are Euro and USD, most of the traders prefer USD as base currency. 

There are some pairs that are called major pair, some are minor pair, some are commodity pairs, some are crosses that include USD crosses, Jpy crosses, European Crosses, you can see the picture below to know about the currency pairs. 

Actually it is a dealing of financial institutions, and a trader is only a retailer that is end consumer. Hundred of currencies are available in market to buy and sell, but it will be dependent upon trading volume, if the trading volume is high, then it will come on top, if there are only a few traders trading the currency then the currency pair will be listed in the bottom of the list and some times it vanish from the list. For example, if we see USD/CHF, then it is the most traded currency pair, that's why it is in the first five pairs, but if we see USD/CZK, then it is not as much traded pair, that's why it is in the last of the list of forex market.

Actually whatever currency you are buying is trading of currency, that is called forex. Let suppose, if you are living in united states and heading to Canada for vacation then the currency of Canada is different from United States. So, you need to change your USD to CAD, you will see a local exchanger to change your united states dollar into canadian dollar, you can see the exchange rate on internet, that will also be available in forex market live chart. The same thing you do in forex market in online trading.

The above chart itself telling the figures and major currency pairs in market. The major currency pairs are most traded pairs and they have good chances to give you a good earning on daily basis.