Trading forex with low cost is the dream of all traders, from beginners to experts. So it is very important to find the lowest brokerage fees in the market. However, first of all, you must know how many fees there are when trading. Well, the most important ones are spread, commission, swap and quotes.
As you know, the forex market is very complicated and difficult to understand at the beginning so some definitions such as spread, commission are very new to traders. Recently I have received many emails from subscribers to ask about the lowest brokerage fees. So I decided to write this article to clarify all for them. It will be more helpful for all traders.
The gap between the price you buy a currency and the price a currency is sold is called spread. The price you buy is also called bid price. The price that brokers offer you to buy a currency is called ask price.
When is spread high?
When the market is just opened
This is the time when spread is extremely high because the price is being adjusted, so it is very unstable.
Before big news release
Whenever big news is about to be released, both traders and brokers cannot know how the market will be shaped afterwards. Therefore, brokers will widen their spread in order to avoid risk. That’s why you shouldn’t trade at these moments.
There are two types of brokers in the market: Market Makers and ECN. While spread is the main income of Market Makers, ECN brokers charge commission. It’s because when you trade ECN, you’re not trading with that broker, so they have very low spread. To make up for the service fees, they charge you commissions. The brokers with the lowest commission rates are Exness, Forex.com, and FXTM.
When you keep your orders overnight, brokers will charge you an amount of money called swap. For scalpers or day traders, they don’t need to care about this fee because they always close their orders before the market closes. Long-term traders who keep their orders open for weeks or months are the one who should be concerned.
Forex trading quotes mention the price of a currency in comparison to another currency. Those quotes are always involved in currency trading pairs as you’re purchasing a currency by selling another pair. For instance, the price of a Euro can be worth 1.1404 dollar when comparing EUR/USD currency pairs. All brokers can quote 2 prices for currency pairs and get the differences (spreads) between 2 prices in normal conditions of the market.
Forex trading quotes: direct or indirect
The quote is shown in accordance with “home currencies” such as the nations you live in. Direct quotes for the traders in the USA, look to purchase Euros, will want to know USD/ EUR & will become equal to US people because the quotes are in USD. Those direct quotes will give US people the prices of a Euro via their home currencies which are 1.1404.
Indirect quotes are inverse of direct one (1 direct quote is equal to 0.8769). It will let you know the values of a unit of home currencies via foreign currencies. The indirect quote might work to turn a foreign trading currency pair abroad into a home currency pair.
Forex trading quotes: top tip
Bid & Ask prices come from the thinking of the brokers. Some traders can buy currencies at the asking prices & sell at the bidding prices.
Basic currencies are the primary currencies in the pairs and the quote currencies are the second ones. The spreads are the primary hurdles which all traders need to realize in trading. The forex trading quotes in this article will help you a lot in trading with the lowest brokerage fees.