Question: Is Forex spread 0.0 pip really possible? How can a broker make profit from this tight spread?
Many Forex brokers promote their brand with classic “Spread 0.0 pip” advertisement though, unfortunately many of them have very inaccurate statement in that.
But to tell the truth, Spread 0.0 pip is actually possible and there are several Forex brokers with such tight spread.
But of course, there will be extra commissions charged from the broker, otherwise the broker wouldn’t really make money from that at all.
We have captured the spread of “XM Zero Account” in November 2016. As you can see, there are many moments that the spread of USDJPY is stable at 0.0 pip.
The trading commission of XM Zero account is $10 per 1 standard lot, so the actual trading cost would be around 1 pip in this case.
XM with over 750,000 accounts opened only in 6 years, has surely a great advantage in terms of trading costs.
How Spread 0.0 pip is possible?
In case of XM, the pricing comes from its liquidity providers, and as XM has several liquidity providers, there will be different pricings coming to MT4.
Then, XM offers these liquidity on MT4 by combining them all.
Spread 0.0 pip is possible only when there are two liquidity providers offering bid and ask prices at the same price.
For instance, if a liquidity provider offers their bid price at 12.345 and another one offers ask price at 12.345, then the combined spread shown in the MT4 would be 0.0.
Spread 0.0 pip is possible, when the broker has made excellent choices of its liquidity providers.
