I’m trying to wrap my head around the fees associated with trading mico lots. I have a FXCM micro practice account but I’m not 100% sure how I’ll be charged once and when I open a real account.
I do understand that the brokerage charges the cost of the spread once I buy it, but is the spread multiplied by the size of my position that I put on?
Please help
Their cost differs with each currency, anywhere from a pip and a half up to thirteen pips.
FXCM Euro is 1.5. so the first pip and a half is theirs for each position you have open.
Example, you buy in with 10 positions of Euro, you gain 10 pips, you net 8.5 pips per position.
Thanks Master Tang. So for every 10 pips in micro lots I loose what I paid for the the spread.
For example:
I sold 50 EUR/USD at 1.47335 with a 1.5 spread
Then I bought it at 1.47305 with a spread of 1.3
= I made $15 on a 3 pip winner, but i pay the broker $6.50??? or $7.50???
Also, will broker cost instantly come out of my balance, or will i be charged later?
You got it.
A 3 pip winner with a 1.5 pip spread will split even. If your gross total of positions x pips was 15 dollars, then your net would be 7.50, and your trade costs would be 7.50.
Of course it does vary from currency tp currency. You may need more pip gains for something like the Pound, or Swiss Franc.
Say the spread is 2.5 for them, if you gain three pips using the same position size for fifteen dollars gross, you’ll net three dollars.
More pips per trade means more profit.
If you sell out for no gain of pips, you don’t break even, you lose 7.50.
As for when it comes out, I don’t know about FXCM, but my broker takes their cut on the daily close. The trade cost aren’t totaled in as I go, just my net win/loss total
Every day, between 2 and 3 PM PST they are shut down. On the open at 3, my new total shows up with the reflected adjustment of the trade costs painfully extracted:D
stupid trade costs
:mad:
Do they also charge you to transfer money out of your account?
Let’s factor in some math here.
Say instead of 50 for a 3 pip gain, you did 30 for a 5 pips.
You got $15.00 gross either way, but instead of splitting the costs,
your trade costs are $4.50, and your net is $10.50.
Scalping for those small gains can be lucrative, but it does tend to run high on the cost side. Especially if you get stopped out on a trade.
Say you gained 3 pips 3 times in a row with 50 lots for a total of 9 pips per lot.
Say your stop loss is set for 3 as well.
You get stopped out on your fourth trade. You’ve now netted a total of 6 pips, but your trade costs are 1.5 pips per position.
You’ve made 4 trades, went .750 on the batting average and you’ve now got a zero balance on the day.
And no, there’s not a transfer fee that I know of.
Thanks for the insight Master Tang.
