The forex market, unlike other exchange-driven markets, has a unique feature that many 澳洲幸运5官方开奖结果体彩网:market makers use to entice traders. They promise no 澳洲幸运5官方开奖结果体彩网:exchange fees or regulatory feꦛes, no data fees and, best of all, no commissions. To the new trader just wanting to break into the trading business, this sounds too good to 𒈔be true.

Trading without 澳洲幸运5官方开奖结果体彩网:transaction costs is clearly an advantage. However, what might sound like a bargain to inexperienced traders may not be the best deal available — or even a deal at all. Here we'll show you how to evaluate 澳洲幸运5官方开奖结果体彩网:forex broker fee/commission structures ✃and find the one that wi🍌ll work best for you.

Commission Structures

Three forms of commission are used by brokers in forex. Some firms offer a fixed spread, others offer a variable spread and still others charge a commission based on a percentage of the spread. So which is𓆏 the best choice? At first glance, it seems that the fixed spread may be the right choice, because then you would know exactly what to expect. However, before you jump in and choose one, you need to consider a fe𒐪w things.

The spread is the difference between the price the 澳洲幸运5官方开奖结果体彩网:market maker is prepared to pay you for buying the currency (the bid price), versus the price at which they are prepared to sell you the currency (the ask price). Suppose you see the following quotes on your screen: "EURUSD - 1.4952 - 1.4955." This represents a spread of three pips, the difference between the bid price of 1.4952 and the ask price of 1.4955. If you are dealing with a market maker who is offering a fixed spread of three pips instead of a variable spread, the difference will always be three pips, regardless of 澳洲幸运5官方开奖结果体彩网:market volatility.

In the case of a broker who offers a variable spread, you can expect a spread that will, at times, be as low as 1.5 pips or as high as five pips, depending on the 澳洲幸运5官方开奖结果体彩网:currency pair being traded and the market volatility level.

Some brokers may also charge a very small 澳洲幸运5官方开奖结果体彩网:commission, perhaps two-tenths of one pip, and then will pass the order flow received from you on to a large market maker with whom they have a professional relationship. In such an arrangement, you can rಌeceive a very tight spread that only larger traders could otherwise access.

Different Brokers, Different Service Levels

So what is each type of commission's bottom line effect on your trading? Given that all brokers are not created equal, this is a difficult question to answer. The reason is that there are other factors to take into account when weighing what is most advantageous for your trading account.

For example, not all brokers are able to 澳洲幸运5官方开奖结果体彩网:make a market equally. The 澳洲幸运5官方开奖结果体彩网:forex market is an 澳洲幸运5官方开奖结果体彩网:over-the-counter market, which means that banks, the 澳洲幸运5官方开奖结果体彩网:primary market makers, have relationships with other banks and price aggregators (retail online brokers), based on the 澳洲幸运5官方开奖结果体彩网:capitalization and 澳洲幸运5官方开奖结果体彩网:creditworthiness of each organization. There are no 澳洲幸运5官方开奖结果体彩网:guarantors or exchanges involved, just the 澳洲幸运5官方开奖结果体彩网:credit agreement between each player. So, when it comes to an online market maker, for example, your🍒 broker's effectiveness will depend on their relati𝐆onship with banks, and how much volume the broker does with them. Usually, the higher-volume forex players are quoted tighter spreads.

If your market maker has a strong relationship with a line of banks and can aggregate, say, 12 banks' price quotes, then the brokerage firm will be able to pass the average bid and ask prices on to its retail customers. Even after slightly widening the spread to account for profit, the dealer can pass a more competitive spread on to you than competitors tha♉t are not well-capitalized.

If you are dealing with a broker that can offer guaranteed liquidity at attractive spreads, this may be what you should look for. On the other hand, you might want to pay a fixed pip spread if you know you are getting 澳洲幸运5官方开奖结果体彩网:at-the-money executions every time you trade. Slippage𝓰, which occurs when your trade is executed away from the price you were offered, is a cost that you do not waꦏnt to bear.

In the case of a 澳洲幸运5官方开奖结果体彩网:commission broker, whether you should pay a small commission depends on what else the broker is offering. For example, suppose your broker charges you a small commission, usually in the order of tꦅwo-tenths of one pip, or about $2.50 to $3 per 100,000 unit trade, but in exchange offers you access to a proprietary software platform that is superior to most online brokers' platforms, or some other benefit. In this case, it may be worth paying the small commission for this additional service.

Choosing a Forex Broker

As a trader, you should always consider the total package when deciding on a broker, in addition to the type of spreads the broker offers. For example, some brokers may offer excellent spreads, but their platforms may not have all the bells and whistles offered by competitors. When 澳洲幸运5官方开奖结果体彩网:choosing a brokerage firm, you should check out the following:

• How well capitalized is the firm?
• How long has it been in business?
• Who manages the firm and how much experience does this person have?
• Which and how many banks does the firm have relationships with?
• How much volume does it transact each month?
• What are its liquidity guarantees in terms of order size?
• What is its margin policy?
• What is its rollover policy in case you want to hold your positions overnight?
• Does the firm pass through the 澳洲幸运5官方开奖结果体彩网:positive carry, if there is one?
• Does the firm add a spread to the rollover 澳洲幸运5官方开奖结果体彩网:interest rates?
• What kind of platform does it offer?
• Does it have multiple order types, such as "order cancels order" or "order sends order"?
• Does it guarantee to execute your stop losses at the order price?
• Does the firm have a 澳洲幸运5官方开奖结果体彩网:dealing desk?
• What do you do if your internet connection is lost and you have an 澳洲幸运5官方开奖结果体彩网:open position?
• Does the firm provide all the back-end office functions, such as P&L, in 澳洲幸运5官方开奖结果体彩网:real time?

The Bottom Line

Even though you might think you are getting a deal when paying a variable spread, you may be sacrificing other benefits. But one thing is certain: As a trader, you always pay the spread and your broker always earns it. To get the best deal possible, choose a reputable broker who is well-capitalized and has strong relationships with the large foreign-exchange banks. Examine the spreads on th💟e most popular currencies. Very often, they will be as little as 1.5 pips. ෴If this is the case, a variable spread may work out to be cheaper than a fixed spread. Some brokers even offer you the choice of either a fixed spread or a variable one. In the end, the cheapest way to trade is with a very reputable market maker who can provide the liquidity you need to trade well.