Hi,
I am sorta new to forex trading and I was wondering how they charge the commissions on each trade.
I trade with a Razer Pepperstone account ( AUD/USD) and they charge
< Commission AU$3.5 per 100k traded
AUD 7 round turn >
From my understanding, they will charge me $3.5 for each 100K I trade I assume including the leverage I use?
Could someone explain to me what this means as I am unsure?
Thank you
You will be charged $7 total to enter and then exit a one-standard-lot (100K) position.
This is referred to as the “round-turn commission”, covering entry ($3.50) and exit ($3.50). Since you have to get out of every position you get into, the round-turn commission (plus the applicable spread) represents the total transaction cost associated with your trade.
The $3.50 figure represents the commission cost “per leg” – one leg to get into your position, and one leg to get out. It’s a useless figure. Focus on the round-turn commission.
That round-turn commission is pro-rated according to your actual position size. So, if you trade one mini-lot (10K units = 0.1 Lot), then the round-turn commission charged to your trade will be $0.70 (one-tenth of the one-lot commission). If you trade one micro-lot (1K units = 0.01 Lot), the round-turn commission will be $0.07.
The position sizes mentioned above are the (leveraged) notional amounts traded, regardless of how much required margin is associated with your account.
Thank you for that explanation, that was very easy to understand.
Is the commission they charge reasonable? I am looking into AUD/USD and they have spreads averaging 0.3 pips.
Don’t choose a broker purely on things like spread, transaction costs, how pretty the site is or how nice they are on the phone.
Do some due diligence on them, there is details on the free school here an what to look for…you have been to the school, haven’t you?
If they do not hide any costs in the spread, it might be reasonable although with an average spread of 0.3 pips, perhaps there are no hidden costs. However it still depends on your trading method and strategy. And don’t forget that most brokers always display the commission for half turn like in your case (3.5 USD per side) which most of the time is a bit confusing, perhaps marketing stuff…who knows. Also this commission for round turn (open and close) is usually charged once the trade is opened and not after closing it.
But if you are a newbie, my advice is not to bustle about opening a live account yet.
For the micro-lot, although the commission is $0.035, Pepperstone says that:
“On MT5 and MT4, micro lots are rounded up or down.”
In this case, $0.035 is rounded up to $0.04 (rounding against the trader).
This means that the round-turn is $0.08, instead of $0.07 (as you can see in the picture below).
