Hello everybody, I really appreciate this Newbie Forum that all of you experts and wanna be�s like myself contribute in to further our continuing forex education. If there was a pre-newbie or �baby� forum (as in crawl before walking) that�s where I should be. I have been demo trading on Onanda�s platform for awhile now.
[I] At what point in a trade do I realize the brokers cost or fee for doing business?[/I] It appears to me that in pips lost or gained after a position is closed, there isn�t any deduction from profit,or any amount added to a loss in the Realized P&L to show the brokers cost, at least on Onanda�s platform. When I start trading in the real world, for real money, will this cost be evident? One other thing, if I am investing five dollar pips, is that the amount brokers charge times the spread? For example: $5pip X 3pip
spread (1.4679/82) = $15. This would depend on broker�s charge per pip and the currency pair at the time. Thank you, Craig
While there are brokers which charge commissions (ECN types), Oanda and other market making brokers do not. They earn their profits from the spread.
Thank you for the reply Rhodytrader. I understand how the market makers
make their money through spreads. What I don’t understand is when do they
deduct their fee from my account. Is it when I open my position, or when I
close my position in a trade? Hope you can understand my newbie explanation.
They never deduct anything from you account. It’s not at all like a fee. As soon as you enter a trade, though, your P&L reflects the spread such that if the market does not move you will be down the value of the spread. Of course, as soon as the market moves that much in your favor you’re not in the red anymore.
I get it now, at the beginning of my trade the spread amount is shown in my
P&L. Thanks for clearing that up for me Rhodytrader.