No Commission Forex

No Commission ForexPutting some of your investment capital into the Forex market can provide you with diversification and unlimited profit potential. While investing in Forex provides you with a number of advantages over other types of investments, one of the biggest advantages is that you can avoid paying commissions. Depending on the setup that you have with your broker, you may not have to pay any commissions as you would with a regular stockbroker. How exactly is this possible?

Spreads

In the Forex market, most retail brokers do not charge commissions to their customers. Instead, they are compensated with the spread on each trade. The spread is the difference between the bid price and the ask price on each currency pair. When you looking at trading platform in Forex, you’ll notice that each currency pair has two prices listed. The first price is the bid price and the second price is the ask price. One price represents what sellers are willing to sell for in the other represents what buyers are willing to buy for. To bring these two entities together, the trader pays the broker the difference between the two prices. This helps facilitate the transaction and allows the trader to buy or sell the currency pair.

While the spread is typically much less than what you would pay in commission, it is still a type of transaction fee. Depending on your trading strategy, this may not amount to much or it could be a significant cost. For example, if you are a scalper, you may place many trades throughout the course of the day. If you place a lot of trades, the spread cost will matter to you more than if you only place one or two trades a week.

Commission Brokers

Although not all Forex brokers charge commission, there are a few that do. These brokers are typically ECN brokers that use STP or straight through processing technology. The advantage of using one of these types of brokers is that it gives you the lowest spreads on your transactions and gives you direct access to the market. You do not trade against your broker and you will instead have your trade processed directly into the market.

With these brokers, you’ll typically have to pay a small commission on each trade that you take. In addition to paying the commission, you may have to pay a very small spread. Some traders prefer to work with this type of broker because of the faster execution and the better spreads, even though it means that they’ll have to pay a little bit more for trading overall.

Considerations

If you’re just getting started in Forex and your trading strategy is not a fast-paced one that relies heavily on low spreads to be successful, you probably don’t need to go with an ECN broker. You can instead go with a traditional retail broker that does not charge you any commissions and you’ll be able to save quite a bit of money because of your choice.

For more information, visit Lucror or contact us today on +64.9.2813160.

This entry was posted in Industry News and tagged , , , . Bookmark the permalink. Post a comment or leave a trackback: Trackback URL.

Post a Comment

Your email is never published nor shared. Required fields are marked *

*
*

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

Live Chat