Just like any other service, brokers have to earn income in one way or another. That is why you have to pay fees and commissions for every trade you engage in. Sometimes, the numbers you find, like PuPrime spreads, are low and suitable for your goals. Other times, buying and selling currencies can be costly, and your broker’s fees may eat up your income.
If you are not careful enough, third-party services can leave you without a dollar in your pocket. So, let’s understand how spreads and fees work and how to avoid paying too much.
About Spreads
Spreads are normal for any trading venture, including foreign currency exchange. There will always be a difference between the actual price of the currency pair — the bid — and what your broker sells it for — the ask. Either way, choosing one with profitable numbers is an essential task for any trader. Some brokers do not charge any fees, but the spread might be pretty hefty.
When starting on Forex, you will also encounter pips. The pip number is how you understand the spread tightness. Regardless of the pip amount, you will always start a trade at a loss, and that is completely normal. But if you trade big, your profits will not match up to your expectations.
Users who go for fast, small trades are not exempt from the issue. Once you take up a currency pair, your trade must move at least by 3 pips in your favor. So, those who make a lot of small trades or open and close positions quickly can lose on spreads quite a lot. Of course, you could cooperate with services like FxCash and receive cashback to cover the cost.
About Broker Fees
Various third-party services for traders also charge fees for their assistance. In addition to spreads, you may have to pay for each trade. In that case, the broker will most likely offer very low spreads or make them non-existent. Yet, you will have to pay a couple of bucks to stay on the Forex market. If you are a fan of small, quick trades, you can benefit from a fee-based service.
How to Keep Your Trading Costs Low
Fortunately, you don’t have to pay many trading fees and commissions all the time. To maximize your income, you can:
- pick a broker that offers tight spreads on your favorite currency pairs;
- analyze and compare the full trading cost;
- study the broker’s fee program;
- open a demo account and test the platform first;
- avoid overnight trades.
More importantly, stick to your original trading plan. If you need to trade less or more for better results, make sure it is suitable for your strategy first.
Tight Spreads and Low Fees — More Income for You
Forex trading requires a lot of knowledge and practice. You have to understand the real costs of every trade to know how much you will end up with. Always study your broker’s spreads and fees before you cooperate and invest real money.
