Spread is the difference between the buy (ask) price and the sell (bid) price. Depending on market conditions (volatility and liquidity), spreads may vary throughout the day (“floating”) or maybe predominantly fixed (“fixed”) for some instruments. The bid-ask spread is the difference between the price at which a broker buys and sells a currency. Therefore, when a client initiates a sell trade with a broker, a bid price is quoted. If the client wants to initiate a buy trade, the asking price is offered.
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Alex Manea
Trading 212 Spread on CFD Account Explained
Like many brokers, Trading 212 doesn't charge transaction fees. Instead, it relies on spreads. In this article, you will learn everything you need to know about the Trading 212 spread system for the Trading 212 CF account type.
How Does Trading 212 Spread Work?
Large equities, currencies, and commodities are highly liquid markets, and less frequently traded financial instruments are less liquid resulting in wider spreads which can lead to very tight spreads. You can see the average spread for a specific product within a predefined period on Trading 212’s product page. The spread for the various products ranges from as low as 0.00035 to as high as 70.
Trading in CFD mode comes with a high spread. Always make sure you check out the spread of the currency you want to trade before getting into it.
CFD spreads can be very small for some currencies, such as the Australian dollar, whereas for others they can be quite large. With a high spread, it is often better to trade in Forex, which has lower spreads and fees on Trading 212. Lower spreads also help a lot when trading with leverage.
Conclusion
Always remember, when you are trading stocks or options, spreads help you determine how much you'll pay when you buy shares or options at one price, and how much you'll receive when selling them at another. With a platform like Trading 212, you can access a wide range of assets and see how much spread they charge for each trade.
FAQs
The idea is that if you're looking to buy a stock, and the price is higher than you'd like it to be, you can wait for it to go down in price before deciding whether you want to invest in it. If there's a lot of demand for something but not enough supply, then its price will usually rise—and if there's a lot of supply but not enough demand, then its price will usually fall.
An asset with a small bid-ask spread will typically be in high demand. Contrarily, assets with a large bid-ask spread might not be in high demand, which would lead to wider price discrepancies.
The spread will be small if the asset is actively traded and therefore liquid. On the other hand, the spread will be greater if the asset is less frequently traded (illiquid).
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