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Calcuating Forex Costs in Trading

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Free Daily Forex Signals & Analysis Subscribe to this Channel and never miss an update!! Become a Standard Member at no cost! Follow me: Twitter: http://bit.ly/2c2aEVL Facebook: http://bit.ly/2L2sYvH Google+: http://bit.ly/2cmuavi Instagram: http://bit.ly/2KHsDSH If you found this video valuable, give it a like. If you know someone who needs to see it, share it. Leave a comment below with your thoughts. Add it to a playlist if you want to watch it later. Forex brokers sometimes market the idea that forex trading has no commission cost, but that isn’t true. Commissions come in one of two possible forms: the spread or a fee. Commissions from the spread come from the broker pocketing the difference between the ask and bid pricing for a forex pair. For example: AUD/USD is trading at the bid for 1.2498 and the ask for 1.2502, and you buy AUD/USD for 1.2502. Your cost is four pips, the difference between the bid and ask. If your cost per pip is $1, then the cost of this trade is $4. The next hour you want to close the trade. AUD/USD is trading at the bid for 1.2526 and the ask for 1.2530. The cost is opening the trade not closing. The total cost of the trade is $4. On the trade, you gained 24 pips or $24, but your costs were 16.6% of your profits which is expensive. Another method a broker may offer is fixed commission fee. A fixed commission can be $5 regardless of the number of lots traded. Using the prior example: $5/$24 = 20.8% $5/$120 = 4.2% A fixed commission broker will usually have tighter spreads as well since they only profit from their fee. A third model of commission fees is a contingent fee based upon the number of contracts traded. The broker’s website states the fee per lot for each currency regardless of market volatility. Using the same AUD/USD example, a broker may charge $.05 per $1k traded. One $10k trade ($1 per pip) costs $.50 $.50/$24 = 2% $.50/$120 = .04% Which model is most cost effective depends on two aspects of how you trade: how many trades you make and the size of your trades. Commissions based on the spread are the most expensive form of fees for small or large traders. As a result of competition, this approach has been losing popularity. Commissions based on fixed fees benefit large traders but are very expensive for smaller traders. Variable fees are a compromise for both small and large traders and are growing in popularity. Short term traders are also known as “scalpers” need to maintain very high win rates to offset their commission costs. Swing and position traders have lower commission costs than "scalpers" since they make fewer trades. Feel free to share this video: http://bit.ly/2cfxLIE Check Out Our Channel: http://bit.ly/2cOU23S Check out our related videos: http://bit.ly/2cOTds2 What is Rollover?, Why is it important? What do I need to know?: http://bit.ly/2cOTds2 Calculating Costs in Forex: http://bit.ly/2cfxLIE Understanding Pips, Margin, and Leverage: http://bit.ly/2cuqCaB The Power of Compound Interest: http://bit.ly/2cmv6Qj Website: http://www.sealionllc.com Learn more about Sea Lion Capital Management: http://www.sealionllc.com/about/ Contact us: http://www.sealionllc.com/contact/ Standard Disclaimer: http://bit.ly/2KWlptA
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Text Comments (2)
TODD BROWN (8 months ago)
Thank you, this video is a great help. #subscribing
Opposite Worlds (1 year ago)
Great information. Thank you...

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