Every day, more people are getting interested in the Forex market. Most of these people are attracted to the Currency Market, because of its advanced technology and capabilities that allow the average working class person participate in this exciting market from the comfort of either their homes or their offices.
This has led to a rise in trading volumes in the Forex market, which undoubtedly has stayed as the fastest growing financial market for the almost 10 years now.
Forex brokers have had to reduce the minimum deposit requirement to fund a trading account by their clients, in order to attract more new customers into the company. It appears as if the opportunities for free education are expanding. Considering the fact that Forex services are not defined by law in some countries, there is room for fraud, so more Forex companies begin to fight for the client. This has led to an improvement of the trading conditions for traders: the orders are executed at lightning speed, there are almost no requotes, and round the clock technical support is always provided.
You should be aware that this is a business and you should treat it as one. There is no doubt that risks are involved, but there are safety measures that you can take in order to prevent a catastrophe to hit your trading account. The same way we take risks into account in any venture investment, we should also take into consideration the costs of running that business. The experts of Optionova pin point the main costs involved in trading.
The staff of the online magazine, Optionova interviewed the experts, Ilya P., Samuel V. and Nikolas K.to get their opinions on which are the main costs of trading.
Optionova: an experienced trader knows that the basic costs of doing business are like commissions and spreads. Do beginners have additional costs?
Nikolas K.: The question is simple and difficult at the same time. It is difficult, because you have to talk about the costs of training, equipment, workplace, the risks of choosing a reliable broker and the danger of making mistakes. It is simple, because the costs of a beginner are the same as the ones of an experience one. Traders always have to pay the transaction costs, because every trader needs to go through the middle man. The cost of transactions in the currency market is what you pay for the spread. Depending on the currency pair, the spreads may be from 2 to 10 pips or even more. Sometimes there is a floating spread, which changes depending on the market’s liquidity and volatility.
Optionova: What is the difference between paying a spread from paying a commission?
Samuel V.: Many Forex traders believe that the spread does not affect the final results of their trading. But they must understand that there is no free lunch. Brokers also have to bear costs on their own in order to provide a reliable order routing from opening the transaction to sending it to the interbank market to get filled. Forex uses spread as a commission, set by the Forex broker. And this spread usually costs 2-3 times more than the Commission on Futures. In addition, the commission rate of a stockbroker is agreed individually with each client depending on the average monthly trading turnover, which means that the larger the volume is, the lower the commissions.
If you take any licensed broker, authorizing access to the Forex market as well as to the currency futures, then you can easily compare the broker's commission along with other exchange fees and come up with the costs of doing business and see that it is less expensive than the cost of trading in the currency market.
For instance, the Euro futures broker’s commission is 65 cents per contract, plus 25 to 35 cents in exchange fees. Total is about $1 per a contract. The euro/dollar currency pair is traded in the Forex market with a spread of 2-3 points, the cost of each item is $10, for a total of 20-30 U.S. dollars per contract. 1 Lot costs equally to 10 futures contracts in the Forex. Then it turns out that for the 10 futures contracts, we paid about $10, and for the same amount in the Forex market, 20-30 dollars.
Ilya P.: In addition to the classic roulette fields of red and black there is also the zero. And if you bet on the color, the probability of winning will be not 50% but slightly less. That's due to this "slightly less" one shouldn’t play casino roulette; it is absolutely unnecessary; mathematically you will always lose. In the trading field the spread and the commission for the transaction function as the "Zero" field. I.e. you have bought or sold - and are right in the red value of a spread. That's why to "play" into the trade is too expensive. If you open a position, you will have to do it consciously, to understand on what basis the factors position is opened, what the risks are, on what you are to rely on etc. This is taught, for example, in our Optionova.
The staff at Masterforex-V World Academy has donated all their time and effort to make sure that the information you get through the Academy is of the best quality and accuracy. Along with the professionals at Optionova, we are constantly striving to be the best and up-to-date online magazine with tons of valuable tools and information for beginners and experts alike.
