What does forex trading cost? – Fees comparison.
Would you like to know what Forex Trading fees may apply? – Then you have come to the right place. We show you from our experiences the costs, which can come up to you and describe to you, why these results to you. In addition, we will show you options for how you can trade most cost-effectively.
These costs can be charged in forex trading:
Spreads Commission Swap (financing fees of the position)
Additional costs of the forex broker:
Account fees Fees for deposits and withdrawals.
Example of Forex Trading Fees.
The forex trading costs are depending on the broker.
The forex trading broker determines the fees that a trader must pay when opening a position. There are cheap and expensive providers. The costs have a decisive effect on a trader’s profits. The cheaper the fees are, the higher your profit will logically be.
In many cases, 2 different account models are offered. The only difference here is how the forex broker earns his money. A distinction is made between a spread and a commission account. From my experience, the commission account is much cheaper and offers more advantages.
Often there are 2 fee models for traders:
Spread model: You pay an additional spread when a position is opened (this may depend on the market situation). Commission model: You pay a minimum spread (often 0.1 points or less) and you pay a fixed commission per 1 lot traded (100,000 of the underlying).
How the forex broker earns money from the spread?
Definition of the spread: The spread is a difference between the buy and sell price.
This spread can always fluctuate due to the market situation because there are not always enough buyers and sellers on one price (this rarely happens). This phenomenon is often seen with very strong price fluctuations (high volatility). The forex broker also adds a spread to the market spread to earn money.
In principle, the trader thus gets execution on a worse price in the market. The difference between the order opening and the current market price is the broker’s profit.
Facts about the spread:
The forex broker earns money through an additional spread The spread depends on the market situation.
The commission fees explained.
Some forex brokers offer the commission model for Forex Trading. First of all, I have to say from my experience that a commission account is always cheaper after my test. Instead of an additional spread, you get the direct market spread for your order execution. The forex provider now charges a commission per lot traded.
The size 1 lot describes 100,000 units of the underlying of the forex pair. For example, in the EUR/USD 1 lot exactly would be 100.000€. A fixed commission is charged depending on the trading volume. The average value is between 5$ and 10$ per 1 lot traded. If you trade a smaller size than 1 lot then the commission is of course also smaller.
Facts of the commissions:
The commission is a fixed amount and depends on the trading volume Traders do not pay an additional spread but the commission Commission based account models are the cheapest accounts.
Financing of your trading position: The swap for leveraged forex.
The swap, also known as an interest rate swap, is incurred when trading in leveraged derivatives. It can also be described as the financing fee for a position. Forex trading is carried out with a lever and the trader borrows money from the forex broker for his position. This, in turn, borrows the money from a bank and lends the money to you at higher interest rates.
The difference in interest is the broker’s profit. The position is therefore financed. This fee only applies to longer-term positions that are held overnight. The amount of the swap depends on the current interest rates of the currency pair and is also dependent on the broker. The swap usually occurs after the market closes at 23:00 hrs.
Advantage: The swap can be positive in Forex Trading.
The swap can also be positive. For example, trade the EUR/USD with a short position, invest in the USD, and sell the Euro. Interest rates in USD are much higher than in EUR. So you even get one credit per day. This is also called the carry trade.
Carry trade example:
The interest rate of the EURO is 0% and the interest rate is the USD. Now you buy the USD and sell the EUR. This means short the currency pair EUR/USD. Now there is a huge difference between these 2 interest rates and you borrow money for the position. You get credited with the interest difference to your trading account.
Facts about the swap:
The swap occurs because Forex Trading is leveraged The fee is only for positions that are opened overnight The swap can be positive or negative The swap depending on the Forex Broker and the interest rates.
Pay fewer fees with a good forex broker.
A good forex broker is essential for success in trading. When making your choice, you should make sure that the provider is officially regulated, has good support, and offers good conditions for trading.
In the table below you will find our top forex brokers, which are self-tested. They are the best and cheapest on the market. With over 9 years of experience in Forex Trading, we have compared a total of hundreds of providers. IQ Option, BDSwiss, and Etoro have the best forex trading conditions in the world. You can already trade from 0.0 pips spread and pay a maximum commission of $ 3.