Pepperstone Spreads & The Level Of Competition in The FX Industry
Forex is one of the most popular trading or investment classes in the world and is growing at an incredibly rapid rate. Over the last few years the Forex market has grown into a $5 trillion a day market as savvy traders flock to try and turn a profit from currency speculation.
This increased interest from investors has brokers in the industry striving to become standard setters in this incredibly competitive industry. While these brokers’ list of services have made it easier and more accommodating for traders, with many companies offering similar services now, it’s pretty difficult to choose one broker over another. Pepperstone has positioned itself to be the best of the best, not just in Australia, but in North America, Europe and Asia too.
What Makes Pepperstone’s Services So Competitive?
Customer service and assisting clients with all their needs is at the heart of what Pepperstone are all about. Pepperstone spreads are some of the most competitive in the industry and are designed to give their customers that extra edge. The company seems to have taken to heart the trader’s desire for a fast and convenient trading environment and has combined software that supports efficiency with some of the best spreads in the market.
Every trader can find their perfect broker based on their needs so the simple answer to finding a competitive Forex broker for yourself is to look at your needs and weigh up the offers of each broker. Some might find a broker who works with variable spreads more appealing to them, while others might prefer fixed spreads. If you’ve gotten this far down and aren’t quite sure what spreads or pips are we delve into this further below.
Spreads & Pips
The jargon in any industry can be overwhelming even for people with loads of experience. We’ll go over a few terms so you can better understand things like pips and Pepperstone spreads.
What Are Pips?
A pip is a price interest point. Which makes perfect sense if you have an intermediate level of Forex knowledge but we’ll go ahead and explain this just a little further. A price interest point is a way to measure the smallest amount of change that can occur in the exchange rate between a currency pair. A currency pair is the two currencies that are being exchanged or bought and sold. You need to be aware of what the pip you’re dealing with is as it can mean the difference between a slight hiccup and a huge loss.
What Are Spreads?
At this point you probably want to know what the Pepperstone spreads we’ve been talking about are so we’ll make this as simple as possible. If you use a broker for trading anything from commodities and currencies to securities then you’ll no doubt be aware that your broker needs to be paid for their services. Usually this payment is in the form of a fee or commission. Most people are familiar with how commissions work and spreads aren’t too different. A broker who charges a commission will be taking a cut of the pip. A trade will involve a bid and an asking price; the spread is the difference between the two.
A broker who charges clients on a percentage of spread basis will either have a variable or fixed spread. A fixed spread will be the same regardless of market fluctuations. In contrast, a variable spread will fluctuate with the market. All of these have their advantages and disadvantages and you’ll need to weigh them up based on your own circumstances. Pepperstone spreads are variable and start at just 0.1 pips on the AUD/USD pair.
What Are Currency Pairs?
Without currency pairs there would be no such thing as a foreign exchange market. A currency pair will always factor in two distinctive parts, the base currency and the quoted currency. When Forex brokers discuss trades you’ll see them illustrated as something like AUD/USD. In this scenario the AUD would be the base currency and USD is the quote currency. These are two currencies but in Forex trading they are one unit. The value of the currency pair is always the base relative to the quote currency. Essentially when you are working with a currency pair the base currency is the one you’re purchasing and the quote currency is the one you’re selling. These actions happen simultaneously so in our initial scenario you would be buying the Australian Dollar as you were selling the US Dollar.
Why do I need a broker?
In this modern world of online trading where markets are more open, it’s easy to understand why you might question the need bother with a broker at all? After all, many industries have moved away from relying on service companies. However, Forex is a little different as it is highly volatile and incredibly easy to lose your money due to poor software. Firms like Pepperstone offer their clients experience, skill, and access. The foreign exchange market is one that is fuelled by exchange rates, hence the name. A broker will have faster access to rates and information than someone not in the industry highlighting the importance of a broker. Foreign Exchange doesn’t happen in a centralised location such as the NYSE in the United States. Instead it is broad and scattered, which makes brokers even more essential in this decentralised system. A broker’s job is to act as your agent to get you the best price possible. They are critical for traders of every level of experience.
Pepperstone Spreads In Summary
We established in our Pepperstone review that they are a very impressive firm. As we’ve gone through the basics of Forex trading it should be clear to you that it is as complex as it is lucrative. A trader who wants to make money has to balance time, resources and risk and needs to completely understand jargon such as pips, commissions and spreads. Pepperstone spreads tend to start as low as 0.00 pips. The company also utilises the best and most reliable software in the industry. They value their customers’ time and money, which is why they have stated that they aim to provide individual traders with institutional level resources. They keep costs low, efficiency high, and customers happy. What’s not to like?
Pepperstone's spreads are highly competitive, especially with Australian FX trading circles.
Reviewed by Noam Korbl