Brokers With Low Spreads

Spreads are the difference between the buy and sell price of a security, such as a forex pair. Some of the best trading brokers will offer low or tight spreads, but they may charge additional commissions. Conversely, wider spreads can reduce your profit margins if you’re trading in large volumes.

This guide will explain what spreads are in detail and what affects them, as well as looking at how ECN brokers work. We also share helpful tips for comparing UK brokers that offer the tightest spreads. Read on for a list of the top brokers with low spreads in 2025.

What Are Spreads?

Spreads are a key way that brokers generate profit. They are the difference between the ask price (sell) and bid price (buy) of an asset. The bid price can be taken as the demand for an asset, while the ask quote can be seen as the supply. The bid price is usually just above the market value of the asset, and the ask price is normally just below. The difference between the underlying value and the bid/ask price is profit for the broker.

Particularly with high volume trading, wide spreads usually mean that it takes longer for traders to make a profit. This is because the risk of trading the asset is higher due to the volatility in price.

Example

The difference between the ask and bid quote is measured in percentage in points (or pips).

So, if the ask price of Tesla is 899.34 and the bid price is 900.41, the spread is 1.07 points/pips.

AvaTrade Spreads

Types Of Spreads

• Fixed: These are spreads that remain the same regardless of changes in the market. Fixed spreads help traders calculate their potential profit before trading, and can also save traders’ money in markets that have a lot of price fluctuation. However, for stable markets, fixed spreads are not always helpful and can sometimes even cut into profits due to their unchanging position.
• Variable/Floating: The opposite of fixed spreads, variable spreads change with market conditions. When prices are less volatile and markets are more liquid, brokers will offer tighter spreads. When prices are more volatile and the markets are less liquid, the spread will be wider.

What Affects Spreads?

• Volatility: The volatility of an asset’s price creates confusion between buyers and sellers on what the actual underlying price should be. This instability causes bigger spreads. Traders can expect to see wider spreads on cryptocurrency and volatile forex pairs, whereas brokers with low spreads will typically offer the best price quotes on stable assets like gold.
• Liquidity: Assets in more liquid markets tend to have tighter spreads. This is because they can be more easily bought and sold, which means that online brokers are more confident in the price.

ECN Brokers & Raw Spreads

Electronic Communication Network (ECN) is a term used to describe the way that a broker manages and processes client orders. It is a Non-Desk Dealing (NDD) type of broker, meaning that the brokerage does not act as the counterparty to customers’ positions. Importantly, this also means more competitive spreads for traders.

Dealing desk brokers take the opposing side to traders, which means that they usually fix the bid and ask price to be profitable for themselves. This can often lead to spreads being wider and can create a conflict of interest as the brokerage profits from traders’ losses.

ECN brokers behave as the intermediary between traders and liquidity providers. This eliminates the conflict of interest. Liquidity providers then bid to trade with the investor, resulting in more competitive spreads.

Because of these benefits, ECN brokers often charge higher fees, for example, increased commission on each trade made and/or a higher minimum deposit amount.

Benefits Of Brokers With Low Spreads

• Trading in high volumes can have a lower overall cost
• If commissions are not too high, low spreads can help traders to improve profit margins

Drawbacks Of Brokers With Low Spreads

• It may not be beneficial to those who trade in low volumes, such as beginners
• ECN brokers often charge higher commissions for low spreads

Spreads Explained. Credit: CMC Markets

How To Compare Brokers With The Lowest Spreads

• Commissions: As outlined above, brokers may charge commissions on top of tight spreads. Competitive commissions along with brokers that offer low spreads are best for reducing the overall cost of trading. Note, commissions are usually a fixed charge per trade or a variable fee based on trading volumes.
• Additional Fees: To compensate for low spreads, brokers can also charge additional fees, such as overnight financing rates, withdrawal fees, conversion costs, and more. Some of the best brokers with the lowest spreads also have a relatively high minimum deposit, for example, upwards of £100.
• Competitive Spreads: Compare the spreads being offered by the broker against the average spread of the asset you wish to trade. For example, the average spread of the GBP/USD forex pair is 1.7 pips. Pepperstone offers a spread of 0.38 pips on this currency pairing, whereas IG offers a spread of 0.90 pips. In this case, Pepperstone’s spread is lower so is more competitive.
• Market Access: If you are interested in trading in international markets such as the US, Europe, and Nigeria, ensure that your broker provides access to them. For instance, if you wish to trade Nasdaq assets, you need to choose UK brokers with very low spreads that offer access to that market, such as eToro.
• Regulation: Regulation ensures that you and your funds receive added protection when you trade. Whether you are looking for a list of ECN, MT4 or forex platforms, ensure that they are all FCA-regulated brokers with low spreads and a competitive minimum deposit.

Bottom Line On Brokers With Low Spreads

Brokers with low spreads are helpful for traders seeking to cut costs when investing. Spreads are one of the most common ways that trading platforms generate revenue, so it is useful to understand how to compare providers.

As a trader, you should look for the tightest spread possible to maximise your profit margins. However, brokers with the lowest spreads often charge additional commission fees, so it is important to paint a full picture of trading costs before opening an account.

See our list of the best brokers with low spreads to start trading today.

FAQ