Forex Commissions on the International Currency Market
The international currency market Forex is a trade area where currencies are bought and sold. To the present day, Forex market is one of the most large-scale and gainful financial markets. The extent of conducted operations reaches around 4 trillion dollars per day. Among the market participants there are banks and financial companies as well as private individuals – traders. Forex market feature is that in distinct from other financial playgrounds it works around the clock 5 days a week giving a permanent earning opportunity.
A trader operating on Forex has a chance to gain huge amounts investing insignificant funds. Although, aside from earning on Forex, the trader also pays commission. Forex market commission is a fee charged for running trading operations. It can be a commission for buy or sell trades with currencies. The main commission on Forex is a spread. Spread is a difference between the currency’s purchase and sale. Furthermore, there is a rolling commission charged daily while the trader’s trade remains open. There are commissions paid by a trader for example for funds withdrawal or order opening.
As a rule, Forex commission is a small amount of money, however, if a trader works in a short term period opening and closing several trades a day – the commission will be slightly higher.
- Normally, the commission size depends on certain factors:
- Currency pair liquidity. Thus, for instance, popular currency pairs have much smaller trade commission than exotic ones. Mostly, the commission values between classical and exotic currency pairs may differ by a large extent.
- The volume of executed operation also makes sense. Making a very small or, conversely, a big operation – the fee will come significantly higher.
- A great significance for Forex commission size has market condition. In the period of macroeconomic news release, experienced traders projections – the commission size expands. Low liquidity also plays its part caused by the time of the day or year – the commission also rises.
There is a range of Forex commission or spread types. A spread can be fixed and floating, standard or for small accounts. Fixed spread is a fee staying unchanged under any conditions in the market. Floating spread – is a charge equaling to 2 points at a stable market situation, however, it can be advanced up to 40-50 points, if there are unforeseen events in the market field.
Trader choosing Forex broker for trading on the international currency market should take into account the size of rendered spread. Trader should try to avoid brokers promising to take all expenditures upon them, as broker’s profit is made from spread paid by traders as a fee for running trades. A trader should give preference to that broker which affords an opportunity to work on the market without extra commissions using spread as a payment for completed trades. Before opening a trading account with one of Forex companies - perform an analysis among the most suitable Forex representatives.