Languages

website utilities

 

Follow us:
+1 (646) 48 000 22 (New York, USA)

5. How much are your trading costs (spread, commission, and swap)?

Spread & Commission
Brokering firms basically earn money through Spread and Commission from your trades. (As you know Spread is the difference between buying and selling price at one moment of the market. Commission, also; is a fixed percentage of your trading amount). Some brokers only use Commission or a combination of Commission and Spread. However, some of them advertise trading without Commission, and actually use bigger Spreads to increase their income.

Although, the total amount of received Spread and Commission of international brokers generally is a fraction (1 to 5 of thousandth of your trading value), lower cost paid by you ultimately mean more profit for you.

If the style of your trading strategy is Scalp or Intraday, you can have a big number of trades with little profit. Considering that you have to pay Spread and Commission for each trade, be careful to select a broker with lower amount of Spread and Commission as this can affect an increase of your total profit greatly.

Swap
But if your trading strategy is less number of trading over a longer period of time, Spread and Commission do not have an important role in getting bigger profits, however; you should consider to Swap. Swap is a sum paid or received by the broker in the time period when one working day is passes to another working day. Swap consists of two parts: first one is the difference between the rates of night interests of currencies you bought or sold, and you may pay or receive it. Second part is the cost you pay for transferring the trade from one working day to the other one.

This way, if you do trades that may remain open for days or months or even years, it becomes very important to be careful about selecting a broker with the minimum rate of received Swap from you and maximum rate of paid Swap to you, or even a Swap Free broker.

Some of the brokers that give services to the Islamic countries have special Islamic accounts which are completely Swap Free or omit the part related to the night interests. Therefore, if you are Muslim, you can select a broker has the special Islamic account.

Therefore, one of the most important points for selecting a broker is the minimum trading costs required for you to pay.