So I was talking with a couple of the top rated USA brokers about spread and how it works as a trading fee vs commission and spread.
So ballpark sounded like 40$ per a trade for spread if you were trading 2 lots (200,000 units) of EUR/USD. Give or take of course because spread changes but around 40$.
With core pricing so commission and lower spreads, it was around 30$ for the same trade. Of course again depending on current spread.
Does this sound right? It caught me a little off guard because stocks I was paying around 15$ round trip per a stock while day trading. Forex fees would kill a day trader it sounds like being almost the triple the amount of stocks when they were charging fees.
Is this information accurate or am I missing something? This is what I gathered speaking to the brokers, i’m sure they knew what they were talking about, just like I said caught me off guard a little and wanted to get a second opinion.
Many brokers to not charge any commission officially but add spreads to the trading accounts instead. Let me tell you how does it work.
For example, you are registered with an ECN regulated broker who claim that the spreads start from 0.0 pips, this means that their is no spread in their price feeds, whatever spread is prevailing in the market as per the market conditions you get them raw. This is the reason why their spreads fall at 0.0 pips as well during extreme liquidity and volatility in the market.
But this broker, will surely charge a commission on your trades separately as they need to have an earning source
Now lets talk about another broker y who is a regulated broker but doesn’t charge commissions at all. In such case, you will notice that they say, “we do not charge any commission’s but we only charge spreads.” This means that whatever is the spread in the market, they have increased it by a fixed pip. for example, spread on EURUSD for a broker offering ECN spreads is 0.4 pips (as per the market) but for a broker charging spread of 1 pip, the total spread on eurusd will be 1.4 pips. Thus, they are charging spreads instead of commission.
Basically, spread is the difference between the buy price and the sell price of the asset or currency that you are currently trading. Spread is usually a source of income for brokers. Every broker has a liquidity provider that directs trades to the market and helps both brokers and traders make payouts. Those liquidity providers have their own spread as well
That is a high spread for this currency pair. It works out to be 2 pips.
There are brokers with more competitive pricing for spread only account types. Typically, you can trade from about 1 to 1.2 pips spread on this currency pair.
With spread + commission trading account types, the costs of trading are usually lower. This account type usually works out to let you trade from around 0.6 - 0.8 pips equivalent spread when it is compared on a like for like basis.
The no-commission brokers make their money from spreads. They don’t charge a separate fee but build a cost into the buy and selling price of the currency pairs you want to trade.
It appears that people aren’t really answering your underlying question. I am from the US as well and I will guess most commenting here are from elsewhere. I’m new to the forex trading scene as well and have the same question as you. From my research it appears US is at a big disadvantage, as we only have a few brokers to choose from. 7 years ago there were a few dozen but politics happened with companies in the space. Your calculations are right based on what I’ve read, if you have learned anything else in the last month please message me id love to chat with you.
In forex trading, the spread is the difference between the bid (sell) price and the ask (buy) price of a currency pair. The buying price quoted will always be higher than the selling price quoted, with the underlying market price being somewhere in-between. Get tight spreads, no hidden fees, and access to 10,000+ instruments.
