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Finding the proprietary trading firm with the absolute best spreads depends heavily on your specific trading strategy, preferred assets, and the time of day you trade, as spreads are inherently dynamic. However, traders often find that firms like FTMO and The Funded Trader offer highly competitive, low-spread environments, particularly through their raw spread or “swing” account types. These options are ideal for minimizing trading costs, which is a critical factor for achieving profitability in a funded account.
Table of Contents
- What Defines a “Good” Spread in Proprietary Trading?
- Why Should Funded Traders Prioritize Low Spreads?
- Analyzing Prop Firms with the Best Spreads: A Comparative Look
- How Can You Verify a Prop Firm’s Spreads Before Committing?
- Are Spreads the Only Cost? Uncovering Hidden Fees
- What Is the Relationship Between Spreads, Liquidity, and Execution?
- The Evolving Landscape: Crypto Prop Trading and Fee Structures
- Which Trading Instruments Typically Offer the Tightest Spreads?
- How Do Account Types Influence the Spreads You Receive?
- Final Considerations for Selecting Your Prop Firm
What Defines a “Good” Spread in Proprietary Trading?
In the world of trading, the spread is the difference between the bid (sell) price and the ask (buy) price of an asset. For a trader, this represents the initial cost of opening a position. A “good” spread is one that is consistently tight, or small, which means the cost of entering a trade is minimal. This is especially vital in proprietary trading, where profit targets are strict and every fraction of a pip counts toward your performance.
The quality of a spread is not just about its size at a single moment. It involves stability, even during moderate volatility, and transparency from the broker or platform providing the liquidity. Exceptional spreads remain competitive without excessive widening during major trading sessions, allowing traders to execute their strategies with predictable costs.
The Difference Between Raw and Marked-Up Spreads
Understanding the type of spread a prop firm offers is crucial. A raw spread is the direct, unaltered price feed from liquidity providers. These spreads can be as low as 0.0 pips on major currency pairs but are almost always paired with a fixed commission per trade. This model is transparent and often preferred by scalpers and high-frequency traders who need the tightest entry points possible.
Conversely, a marked-up spread (often called a “standard” or “commission-free” account) includes the firm’s fee within the spread itself. While this simplifies the cost structure by eliminating a separate commission charge, the spreads are inherently wider. For swing traders or those who trade less frequently, the convenience might be appealing, but for active traders, the cumulative cost of wider spreads can significantly eat into profits.
How Spreads Impact Different Trading Styles
Your trading methodology directly dictates how much impact spreads will have on your profitability. A scalper, who aims for numerous small profits of just a few pips, is extremely sensitive to spreads. A 1-pip spread on a 5-pip target represents a 20% cost hurdle before any profit is made. For them, raw spread accounts are almost a necessity.
A day trader holding positions for several hours can tolerate slightly wider spreads, but they still benefit greatly from competitive pricing to maximize gains on intraday moves. A swing trader, who holds positions for days or weeks, is the least affected by the entry cost, as their profit targets are much larger (e.g., 100+ pips). For them, factors like overnight swap fees might be a more significant cost than the initial spread.
Why Should Funded Traders Prioritize Low Spreads?
For a funded trader, managing costs is just as important as generating profits. The evaluation challenges and funded accounts come with specific rules, such as maximum drawdown and profit targets. Low spreads directly contribute to meeting these objectives in several ways.
Maximizing Profit Potential
Every pip paid in spread is a pip that doesn’t count toward your profit target. Consider a $100,000 challenge with an 8% profit target, requiring $8,000 in gains. If you execute 100 trades and pay an average of 1 pip extra on the spread for each trade (at $10/pip), you have spent $1,000 just on wider spreads. That is $1,000 that needs to be overcome before you even start making progress toward the target. Prioritizing a firm with tight spreads gives you a direct mathematical advantage and shortens the path to profitability.
Reducing the Impact of Slippage
Slippage occurs when your trade is executed at a different price than you requested. While often associated with fast-moving markets, it can also be exacerbated by poor liquidity, which is often correlated with wider spreads. Firms that partner with top-tier liquidity providers can offer both tight spreads and deep liquidity, resulting in better execution quality and less slippage. This ensures your intended entry and exit points are honored more frequently, protecting your strategy’s integrity.
Analyzing Prop Firms with the Best Spreads: A Comparative Look
While spreads are variable, we can analyze the models offered by leading firms to understand their cost structures. Most reputable firms offer different account types to cater to various trading styles. The table below illustrates typical offerings you might encounter.
| Feature | Typical Raw Spread Account | Typical Standard Account |
|---|---|---|
| Spreads | Starts from 0.0 pips on majors | Starts from 0.8 – 1.2 pips on majors |
| Commission | Yes (e.g., $3-$7 per round turn lot) | No (commission is “baked into” the spread) |
| Best For | Scalpers, algorithmic traders, active day traders | Swing traders, discretionary traders, beginners |
| Pros | Maximum transparency, lowest possible entry cost | Simple cost calculation, no separate commission fee |
| Cons | Requires calculating commission on each trade | Higher overall cost for high-frequency trading |
Firms consistently praised for low-cost trading environments often provide access to cTrader or specific MT4/MT5 servers that are configured for raw feeds. When evaluating, look for firms that are transparent about their liquidity providers and don’t place restrictions on trading styles that thrive on low spreads, like scalping.
How Can You Verify a Prop Firm’s Spreads Before Committing?
Never take a firm’s marketing claims at face value. Advertised “spreads from 0.0 pips” may only apply to specific pairs during peak liquidity hours. Diligent verification is essential before purchasing a challenge.
Utilizing Demo Accounts and Free Trials
The most reliable method is to sign up for a free trial or demo account. Most top-tier prop firms offer this. Once you have access to the trading platform, open a market watch window and observe the spreads on your preferred instruments in real-time. Pay attention to how they behave during different trading sessions (e.g., London, New York, Asian sessions).
Checking Live Spreads During High-Impact News
A true test of a firm’s liquidity is how its spreads react during high-impact news events like the Non-Farm Payroll (NFP) report or interest rate decisions. While all brokers will experience spread widening during such volatility, the extent of the widening separates excellent liquidity from poor liquidity. Watch the platform during these events to see if spreads become untradable or if they remain manageable.
Are Spreads the Only Cost? Uncovering Hidden Fees
Focusing solely on spreads provides an incomplete picture of a prop firm’s cost structure. To perform a true cost-benefit analysis, you must investigate all potential fees associated with an account.
Commissions: The Other Side of the Coin
As mentioned, commissions are the standard pairing for raw spread accounts. This fee is typically charged per lot traded and can vary from one firm to another. A firm might offer 0.0 pip spreads but charge a high commission of $7 per round-turn lot, while another offers 0.2 pip spreads with a much lower commission of $3. You must calculate the combined cost (spread + commission) to determine which is truly cheaper for your trading volume.
Swap Fees and Overnight Charges
For traders who hold positions overnight, swap fees (or rollover fees) are a significant cost. This is an interest payment for holding a leveraged position past the market close. Depending on the currency pair and whether you are long or short, a swap can be a credit or a debit. Some prop firms offer “swap-free” accounts, but these often come with wider spreads or other administrative charges to compensate. Swing traders must pay close attention to a firm’s swap rates.
What Is the Relationship Between Spreads, Liquidity, and Execution?
Spreads, liquidity, and execution speed form a triad that defines the quality of a trading environment. They are deeply interconnected. Liquidity refers to the volume of buy and sell orders available at any given price. High liquidity, sourced from multiple top-tier banks and financial institutions, allows a broker to offer tight spreads because there is always a willing counterparty for a trade.
This deep liquidity pool also enables fast and reliable execution. When you click “buy,” there is enough volume available to fill your order instantly at or very near the price you see. In a low-liquidity environment (often characterized by wide spreads), your order may be filled at a worse price (slippage) or rejected entirely because not enough volume is available. Therefore, a firm that can genuinely offer tight spreads is also signaling that it likely has strong relationships with its liquidity providers, leading to a better overall trading experience.
The Evolving Landscape: Crypto Prop Trading and Fee Structures
While the forex market has long been the focus of prop trading, the digital asset space is rapidly emerging with its own unique models. The fee structures in crypto trading can be fundamentally different and, in many cases, more advantageous for certain traders.
How Crypto Futures Trading Differs
Unlike forex spot trading, which relies on the bid/ask spread, crypto futures trading on centralized exchanges often operates on a maker-taker fee model. In this system, “makers” who provide liquidity by placing limit orders are often rewarded with very low or even zero fees. “Takers” who remove liquidity with market orders pay a small, fixed percentage fee. This structure is highly transparent and rewards disciplined trading.
Finding Low-Fee Platforms for Digital Assets
For traders specializing in cryptocurrencies like Bitcoin and Ethereum, the conversation shifts from “best spreads” to “best fee structure.” The ideal platform is one that offers deep liquidity, minimal slippage, and a competitive maker-taker fee schedule. This is where platforms focused purely on digital assets excel.
For instance, platforms like Cointracts are pioneering a trading environment built for the modern digital asset trader. By focusing on deep liquidity for crypto perpetual futures and a highly competitive fee structure, they offer an alternative to the traditional spread-based model. This allows crypto traders to engage with the market through a cost-effective and transparent system, which is perfectly aligned with the principles of professional proprietary trading. The emphasis is on execution quality and low, predictable transaction costs rather than variable spreads.
Which Trading Instruments Typically Offer the Tightest Spreads?
Within any prop firm’s offerings, spreads will vary significantly across different asset classes. Understanding where to find the lowest costs is key to asset selection. Generally, the major forex pairs (EUR/USD, GBP/USD, USD/JPY) boast the highest liquidity and therefore the tightest spreads. This makes them the preferred choice for scalpers and other high-frequency traders.
Minor forex pairs and exotic pairs will have progressively wider spreads due to lower trading volumes. Major indices like the S&P 500 (US500) and NASDAQ (US100) also tend to have very competitive spreads during their respective market hours. Commodities like Gold (XAU/USD) have excellent liquidity, but spreads can widen more significantly during periods of global uncertainty compared to major forex pairs.
How Do Account Types Influence the Spreads You Receive?
The type of challenge or account you select within a single prop firm can have a direct impact on the spreads you trade with. Many firms offer distinct account options designed for different trading approaches, and the cost structure is a primary differentiator.
For example, a firm might offer a “Standard Challenge” with marked-up spreads and no commissions, making it simple for beginners. Alongside this, they may have a “Swing Account” which not only allows holding trades over the weekend but might also feature slightly wider spreads to buffer against weekend gap risk. Finally, an “Aggressive” or “Pro” account might grant access to raw spreads and commissions, targeting experienced day traders and scalpers. Always check the fine print for the specific account you are interested in, as the advertised spreads may not apply to all options.
Final Considerations for Selecting Your Prop Firm
Choosing a prop firm is a major decision, and while spreads are a critical component, they are part of a larger picture. A firm with the tightest spreads is worthless if its platform is unstable, its customer support is unresponsive, or its withdrawal process is unreliable. Your final choice should balance low trading costs with the firm’s overall reputation, trust, and the quality of its technological infrastructure.
Evaluate firms based on their execution quality, available platforms (MT4, MT5, cTrader), range of tradable instruments, and the clarity of their rules. A truly great prop firm provides a comprehensive ecosystem that empowers traders to succeed, and competitive spreads are a foundational element of that support system.
