FOREX

The fees and costs of forex brokers – ForexLive


What you need to know about what your broker charges you


Each forex broker
charges fees in one form or another. Then, there are trading costs linked to
every trade placed.

Most
traders
typically ignore the overall cost per
trade that can make a massive difference to the entire outcome of a portfolio.

As the most common
cost is via spreads, other fees and costs are still applicable and must not be
neglected.

Transparent
brokers would always be upfront in their fees and list them either on the
website, trading platform with every trade ticket, or both.

Direct
Trading Costs

Direct trading
costs consist of spreads, commissions, swap rates, etc. Not all costs apply to
all trades, and it all depends on the kind of asset traded – if they traded on
a margin and the duration and the duration of every trade.

The broker needs
to mention all costs included in every trade. Also, transparent brokers list
them in their trading conditions and give examples of how they incur and
calculate costs.

Then, trading
costs can be found inside the trading platform – especially if the broker
offers a proprietary trading platform.

They also provide
traders with calculators, letting them calculate the cost of every trade before
placing it.

Spreads

Spreads are the
most usual cost associated with trade and refer to the difference between the
bid and ask price.

In addition to
that, spreads are the main income source for brokers who live from the mark-up
on raw spreads.

Raw spreads can
become as low as 0.0 pips in the EUR/USD -the most liquid currency pair that
carries the lowest spread. Everything over this level is the mark-up that the
broker charges.

Commissions

Several accounts
come with spreads as low as 0.0 pips on the EUR/USD. However, the broker
charges a commission per lot.

Typically,
accounts charging commissions are ECN accounts that run a no-dealing desk
execution.

Here, traders get
the raw spreads, or near to it. Then, in return, the broker charges a
commission.

Aside from that,
they charge commissions on equity trades, and different assets, such as ETFs,
ETC’s, bonds, and more, will carry a commission charge.

Then, to get the
complete details on which assets carry a commission, traders must either
consult the asset directory given by their broker or get the information
straight from the trading platform.

Transparent
brokers
will list the full contract
specifications on their website as proprietary trading platforms list all the
details in every deal ticket.

Volume discounts
are often provided to an account that carries commissions.

Swap Rates

Swap rates or
rollover rates apply to every position held overnight. Swap rates happen
because of the interest rate differences in the base currency and the quote
currency.

Also, brokers will
list the way this rate is calculated, and there is a Swap Long and a Swap Short
rate.

Swap rates will
either become credited from or debited to the account balance, depending if the
traders take a long or short position.

Many brokers fail to
forward favorable swap rates to traders.
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