how do forex brokers charge traders with pip spreads?

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how do forex brokers charge traders with pip spreads?
i know that the less pip spreads a forex broker offers the better. but why? how do they make money by offering more or less pip spreads?
thanks in advance.

Best answer:

Answer by StopSpending
A “pip” is a fraction of a unit of currency. For instance, the current level of the dollar versus the British pound is $ 1.9671 per pound. The $ 0.0001 is called a pip. A forex broker will make a quote $ 1.9670 bid and $ 1.9672 offered. In this case, the spread is 2 pips (i.e., $ 0.0002). If you want to buy pounds, you must pay $ 1.9672 dollars. If you want to sell pounds, you will receive $ 1.9670.

So, if you trade frequently, you would prefer a narrow spread, like the one above, to a spread of, say, $ 1.9500 bid and $ 1.9700 offered. In the latter case, you need the $ /pound rate to move a lot just to break even.

Know better? Leave your own answer in the comments!


  1. evermore (November 19th, 2013 at 12:48 pm)

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