What does Forex Trading cost in 2019?
Would you like to know what Forex Trading fees may apply? – Then you have come to the right place. I show you from my experiences the costs, which can come up to you and describe you, why these result to you. In addition, I will show you options for how you can trade most cost-effectively.
These costs and fees will be discussed in more detail in the following texts.
These costs can be charged in Forex Trading:
- Swap (financing fees of the position)
Additional costs of the Forex Broker:
- Account Fees
- Fees for deposit and withdrawal
The Forex Trading costs depend on the broker
The Forex Trading Broker determines the fees that a trader must pay when opening a position. There are cheap and expensive providers. The costs have a decisive effect on a trader’s profits. The cheaper the fees are, the higher your profit will logically be.
In many cases, 2 different account models are offered. The only difference here is how the Forex Broker earns his money. A distinction is made between a spread and a commission account. From my experience, the commission account is much cheaper and offers more advantages.
Often there are 2 fee models for traders:
- Spread model: You pay an additional spread when a position is opened (this may depend on the market situation).
- Commission model: You pay a minimum spread (often 0.1 points or less) and you pay a fixed commission per 1 lot traded (100,000 of the underlying).
How the Forex Broker earns money from the spread?
Definition of the spread: The spread is a difference between the buy and sells price.
This spread can always fluctuate due to the market situation because there are not always enough buyers and sellers on one price (this rarely happens). This phenomenon is often seen with very strong price fluctuations (high volatility). The Forex Broker also adds a spread to the market spread to earn money.
In principle, the trader thus gets execution on a worse price in the market. The difference between the order opening and the current market price is the broker’s profit.
Facts about the spread:
- The Forex Broker earns money through an additional spread
- The spread depends on the market situation
The commission fees explained
Some Forex Brokers offer the commission model for Forex Trading. First of all, I have to say from my experience that a commission account is always cheaper after my test. Instead of an additional spread, you get the direct market spread for your order execution. The forex provider now charges a commission per lot traded.
The size 1 lot describes 100,000 units of the underlying of the forex pair. For example, in the EUR/USD 1 lot exactly would be 100.000€. A fixed commission is charged depending on the trading volume. The average value is between 5$ and 10$ per 1 lot traded. If you trade a smaller size than 1 lot then the commission is of course also smaller.
Facts of the commissions:
- The commission is a fixed amount and depends on the trading volume
- Traders do not pay an additional spread but the commission
- Commission based account models are the cheapest accounts
Financing of your trading position: The swap for leveraged forex
The swap, also known as an interest rate swap, is incurred when trading in leveraged derivatives. It can also be described as the financing fee for a position. Forex trading is carried out with a lever and the trader borrows money from the Forex Broker for his position. This, in turn, borrows the money from a bank and lends the money to you at higher interest rates.
The difference in interest is the broker’s profit. The position is therefore financed. This fee only applies to longer-term positions that are held overnight. The amount of the swap depends on the current interest rates of the currency pair and is also dependent on the broker. The swap usually occurs after the market closes at 23:00 hrs.
Advantage: The swap can be positive in Forex Trading
The swap can also be positive. For example, trade the EUR/USD with a short position, invest in the USD and sell the Euro. Interest rates in USD are much higher than in EUR. So you even get one credit per day. This is also called carry trade.
Carry trade example:
The interest rate of the EURO is 0% and the interest rate in the USD. Now you buy the USD and sell the EUR. This means short the currency pair EUR/USD. Now there is a huge difference between these 2 interest rates and you borrow money for the position. You get credited the interest difference to your trading account.
Facts about the swap:
- The swap occurs because Forex Trading is leveraged
- The fee is only for positions which are opened overnight
- The swap can be positive or negative
- The swap depending on the Forex Broker and the interest rates
Pay fewer fees with a good Forex Broker
A good Forex Broker is essential for success in trading. When making your choice, you should make sure that the provider is officially regulated, has good support and offers good conditions for trading.
In the table below you will find my top Forex Brokers, which are self-tested. They are the best and cheapest on the market. With over 4 years of experience in Forex Trading, I have compared a total of hundreds of providers. Tickmill has the best Forex Trading conditions in the world. You can already trade from 0.0 pips spread and pay a maximum commission of 2$.
|1. Tickmill|| (5 / 5) |
|Starting 0.0 pips + 1$ commission per 1 lot||+ Best conditions |
+ Best execution
+ Personal service
|2. Vantage FX|| (5 / 5) |
|Starting 0.0 pips + 2$ commission per 1 lot||+ Good conditions |
+ ECN Broker
+ Personal service
|3. BDSwiss|| (5 / 5) |
|Starting 0.3 pips||+ Individual offers |
+ Trading signals
+ Personal service
Additional fees which can occur for Traders
In my experience, many Forex Brokers do not charge these fees in order to gain a market advantage over other providers. However, it often happens that there are account maintenance fees for inactivity. If the trader has not opened a position after up to 3 – 12 months, a fee of up to 50€ may apply. This is however dependent on the offerer.
Further costs are possible with the payment of customer money. There are usually no fees for the deposit. But also with the disbursement, many providers do not charge any fees. Should this still be the case, you can view it transparently in the button.
Conclusion: Rarely there are additional costs.
Conclusion: The fees are very low in Forex Trading
On this page, I have shown you which costs you may incur when trading. Due to the competition among online brokers, the fees have become very low, but you should still look for the cheapest providers to make bigger profits. I have again all the important points of this page for you structured:
Forex Brokers offer different fee models:
Forex Trading fees are very important. The fees are critical for your profit and loss. So choose a trusted and cheap Forex Broker.