Hey Guys
i’m new to the forex business. Can somebody tell me how is the fee structure in forex brokerage in percentages? I get confused with all the spreads, pips, and leverages.
Thank you so far
Paul
Hi Paul,
as I started learning forex, I spent some time to collect such information and make a small summary for myself. And finally discovered those small pips are more dangerous than they seem, at least for beginners like us. So from a beginner to a beginner:
I will depict 3 types of accounts depending on leverage and min trade size.
Account type 1. Typical trading conditions
Min size: 100€
Min trade: 0,01 lot
Leverage: 1:200
Spread: 3 pips
Example 1 - mini:
Minimum trade is 0,01 Lots, equivalent to a transaction volume of 1000$. This is a leveraged volume, so the real volume is 5$ obtained by dividing 1000/200
The spread is payed onto the transaction volume, 3 pips on 1000$ are 0,3$. Finally you are paying 0,3$/5$ -> 6% fees!
Account type 2. Typical trading conditions
Size: 500€
Min trade: 0,1 lot
Leverage: 1:200
Spread: 2 pips
Example 2
Minimum trade is 0,1 Lots, equivalent to a transaction volume of 10,000$. This is a leveraged volume, so the real volume is 50$ obtained by dividing 10,000/200.
The spread is payed onto the transaction volume, 2 pips on 10000$ are 2$. Finally you are paying 2$/50$ -> 4% fees!
Account type 3. Typical trading conditions
Size: 2,500€
Min trade: 0,1 lot
Leverage: 1:100
Spread: 0,8 pips
Example 3
Minimum trade is 0,1 Lots, equivalent to a transaction volume of 10,000$. This is a leveraged volume, so the real volume is 100$ obtained by dividing 10,000/100.
The spread is payed onto the transaction volume, 0,8 pips on 10000$ are 0,8$. Finally you are paying 0,8$/100$ -> 0,8% fees!
Hope someone can complete with other examples. But the fees heavily depend on the broker. As a general rule, the higher the leverage the higher the fees. This makes sense, as you are getting much more volume.
Somehow I posted double, sorry about that.
Hey thanks for the comprehensive summary, I also did some calcs but I was not sure about my results. Certainly 3 pips seem to be a bit too much for me. But I guess as a beginner there is no alternative, if you do not want to risk too much capital.
I´ve read the results with a demo account are not to take into account, as the mental pressure from losing trades is not affecting the judgement. So I am wondering about killing a couple of 100€ accounts before getting into something real.