Raw Spread vs Standard Account

Introduction

Finding the ideal forex account type, especially for novices, can be tough when navigating the many forex account types available in this large ecosystem of financial instruments. As such, there are many different sorts of forex trading accounts available to suit the needs of all types of traders, not just beginner traders but also the more advanced trader.

Nowadays, many forex brokers offer a variety of different types of trading accounts. The raw spread trading account and the regular standard trading account are two of the most popular options available. After gaining experience in the forex demo account, beginners may opt for a micro or mini account as a starting point, but when it comes time to improve their trading environment, they will have to select between a raw spread and a standard account. Here is where it all boils down to whether raw spreads or standard trading accounts are preferable in the long run.

The most significant distinctions between a raw spread trading account and a conventional standard trading account are the charges associated with trading, specifically spread and commission fees.

What is a Standard Account?

A Standard account is excellent for traders who want to trade forex in the traditional way. It has ultra-competitive spreads and doesn’t charge commissions, the spread is the price you pay.

If you are new to Forex, a basic account is the best place to start. This account was created with flexibility in mind, allowing you to trade whenever you want. You have complete control over the degree of leverage you want, as well as how much you want to deposit at any given time. The minimum deposit requirement is usually pretty reasonable. This account has swaps and set spreads, as per market practice.

The Standard account requires a larger initial expenditure, but owners have access to standard lots for each currency. This form of account can yield more earnings in a single day, but it also carries the danger of losing it the next day. In live trading on the forex market, beginners must cope with the typical laws of leverage and margin. However, only an expert can completely comprehend the complexities of using this account for forex trading. While many names for FX accounts exist, they all offer the same features and functions.

What Is Raw Spread in Forex?

When you have the best potential forex conditions the market has to give, you have a raw spread. This gives you the instrument’s true underlying pricing without any markup. If you’re trading the USD/CAD currency pair and it’s currently trading at 1.3879, you’ll get this price instead of the markup.

This account differs from a conventional account in that it provides you with the greatest terms your broker has to offer. As a result, you may have zero spreads for the majority of the trading session, but you will have to pay brokerage costs.

Between one to five pips is the standard and possibly best raw spread among forex brokers.

Comparison between Raw Spread vs Standard Account

For their trading accounts, each forex broker can set its own terms and conditions. Various brokers’ standard trading accounts will certainly have different fees, maximum leverage, margin requirements, and so on. Raw spread account works in the same way. This makes deciding which sort of account is best difficult without knowing which broker you will use to open the accounts. Apart from those precise words, we might still evaluate the basic circumstances of raw spread vs standard account.

A Raw account gives you access to the true underlying price of the instrument you’re trading, with no broker markup. For each trade you make, you pay a brokerage fee.

A raw spread trading account, often known as an ECN account, provides all instruments with real market prices. Because forex brokers do not add a markup to asset pricing, spreads are typically very low. Traders, on the other hand, must pay a larger commission price for each trade they perform. Some forex brokers charge fees for each opening and closing trade, while others charge costs after one complete round-turn.

In a standard account, you are charged a markup (spread) on the price of the instrument being traded, rather than a per-trade brokerage fee. A standard account provides asset values that have been marked up by the broker by a fixed amount. Spreads are frequently bigger, while commission fees for each trade are usually lower or perhaps non-existent.

Consider the following scenario: you wish to purchase the USD, which is currently trading at $1.00.

Due to a $0.01 spread charged by the broker, if you have a standard account, your platform will actually display inaccurate pricing of USD $1.01, which is incorrect. Therefore, when you purchase the currency, you will incur a loss immediately, and the price of the USD will need to hit $1.02 before you can turn a profit of $0.01.

If you have a raw account, your platform will reflect the exact price of $1.00, but you will be required to pay a brokerage fee as part of the purchase transaction. This means, however, that the price of the US dollar only needs to move to $1.01 in order for you to make a return on your investment.

You must consider a lot of factors in order to determine which account is the best option. These include:

• First and foremost, is the spread on the currency you intend to trade higher than the spread on the corresponding brokerage fee that would be charged? If so, proceed.
• Does the spread get more affordable as the number of stocks you acquire increases? Is it true that the cost of the brokerage charge increases in proportion to the number of securities you purchase?
• And what is your trading approach? If you are a scalper, meaning that you make trades based on frequent but small fluctuations in price, a RAW account may be the best option for you. If the situation is reversed, a regular account may be the best option for you.

Which one is the better choice?

Every trader, depending on their trading technique, may have a different point of view on the subject. If you are a scalper who needs to profit from slight changes in asset prices, the raw spread trading account may be a better option for you. However, if you are a swing trader or a position trader, a normal trading account may be more favorable for your trading style.

In fact, employing a longer-term plan might provide you greater flexibility in selecting trading accounts, you are not required to select the one with the most accurate pricing, as is the case with short-term methods, which are heavily reliant on it.

To determine which broker will incur cheaper costs for your trading tactics, you can evaluate both the spread and commission rates that are paid by your chosen broker.

It might be difficult to choose which forex account type is appropriate for you, whether you are looking for the finest forex account type for beginners or a top-notch account for seasoned traders that offers leverage and adjustable lots, depending on your needs.

When you are just getting started, you may want to choose a micro or mini forex trading account because they have a minimal minimum deposit requirement and allow you to trade conventional micro and nano lot sizes.

Now, it is safe to state that the majority of forex traders have at least two trading accounts open at any given time. One of the reasons for doing this is so that one account can be used to execute a trade while the other can be used to hedge your initial trade. It is recommended, however, that you get comfortable with forex trading before attempting this strategy.

Unless you intend to become a full-time forex trader, it is not required to upgrade your trading account to a higher level. While there are certain advantages to upgrading to, for instance, an intermediate account, it is not absolutely necessary to do so. Aside from that, as the old adage goes, if it isn’t broken, don’t repair it!

FAQ

What is the difference between a Raw spread account and a Standard account?

Standard Account does not charge a commission but has a markup in the spread received from the liquidity providers. The Raw Spread Account shows the raw interbank spread received from the liquidity providers. A commission is charged on this account per standard lot round turn.

Which is the best account type for a beginner trader?

The Standard account type would be the best starting account for a beginner trader.

What risks are there to considering opening either of the two account types?

To trade in forex always has risks involved. In the case of choosing between raw spreads or standard, raw spreads are much lower than standard spreads, but in order to use it profitably – you need to be well oriented in the market and be able to make calculations correctly so that you can have several trades in parallel and it is safe.