• ABOUT US
  • Forex Store
  • Privacy Policy
  • Terms Of Use
  • Sitemap
  • Contact Us
  • Twitter
  • Facebook
  • RSS Feed
Best Forex Robots | FX Expert Advisors | Forex EA's
  • Top 25 Ranking
  • Best Forex Brokers
  • Forex Broker Rebates
  • Best Forex VPS
  • Forex Basics
    • What Is Forex Trading?
    • Who Trades Forex
    • Forex Trading For Beginners
    • How to Start Forex Trading
    • Market Hours
    • Currency Pairs
    • Currency Pair Correlations
    • Chart Types
    • Pips and Profits
    • Trade Order Types
    • Leverage, Lots and Margin
    • Transaction Costs
    • Best Hours, Days, Months to Trade
    • Overnight Interest, Rollover, or Swap Rate
    • Reflections of a Trader in the World of Options
    • Reflections of a Trader in the World of Commodities
    • FX Advantages Over Stocks and Futures
FOREX NEWS
  • [ January 31, 2023 ] Happy News EA Review Happy News EA
  • [ January 29, 2023 ] Forex Flex EA Review Forex Flex EA
  • [ January 28, 2023 ] FXCharger EA Review FXCharger EA
  • [ January 27, 2023 ] FX Eternals EA Review FX Eternals EA
  • [ January 26, 2023 ] FXCipher EA Review FXCipher EA
  • [ January 25, 2023 ] Happy Breakout EA Review Happy Breakout EA
  • [ January 24, 2023 ] Trade Explorer EA Review Trade Explorer EA
  • [ January 23, 2023 ] Happy Gold EA Review Happy Gold EA
  • [ January 22, 2023 ] FXGoodWay EA Review FXGoodWay EA
  • [ January 21, 2023 ] FXTrackPRO EA Review FXTrackPRO EA
HomeForex BasicsTransaction Costs

Transaction Costs

Best Forex Robots Forex Basics Comments Off on Transaction Costs

Welcome To This Testing Website With Reviews And Real Trading Results

Top 25 Ranking Of The Best Forex Robots | FX Expert Advisors | Forex EA’s In 2023

Top 25 Ranking Of The Best Forex Robots 2023

Top 25 Ranking Of The Best Forex Robots For 2023
As the foreign exchange market continues to evolve, traders are seeking new and innovative ways to improve their strategies and gain a competitive edge. Forex robots, also known as expert advisors (…

BEST FOREX ROBOTS | FX EXPERT ADVISORS | FOREX EA’S - BESTFOREXROBOTS.COM

Happy News EA Review

Happy News EA
Price: €349.30 (Discounted Price for Happy News EA with 2 LICENSES, FREE UPDATES & SUPPORT)
Currency pairs: EURUSD, GBPUSD, AUDUSD and USDJPY
Timeframe: M15

Note: STRICTLY LIMITED DISCOUNT – 30% OFF

There are 2 differe…

Happy News EA Review

Forex Flex EA Review

Forex Flex EA
Price: $349.47 (Discounted Price for Forex Flex EA, 1 LIVE Account License for Metatrader 4 (MT4), UNLIMITED DEMO ACCOUNTS, FREE UPDATES & 24/7 FRIENDLY SUPPORT)
Currency pairs: Any (GBPUSD, EURUSD, USDJPY, USDCAD, USDCHF, AUDUS…

Forex Flex EA Review

FXCharger EA Review

FXCharger EA
Price: $385 (FXCharger MAX Package with 1 LICENCE, FREE SUPPORT & UPDATES)
Currency pairs: USDCAD, EURUSD, EURGBP, AUDUSD and USDJPY
Timeframe: H1

Note: There are 2 different packages of FXCharger Robot available right now…

FXCharger EA Review

FX Eternals EA Review

FX Eternals EA
Price: €149 (STANDARD Package with 3 REAL & UNLIMITED DEMO ACCOUNTS, FREE UPDATES & SUPPORT)
Currency pairs: USDCAD
Timeframe: H4

Note: There are 3 different packages of FX Eternals Robot available right now:

– ST…

FX Eternals EA Review

FXCipher EA Review

FXCipher EA
Price: $295 (FXCipher EA with 1 LICENCE, FREE UPDATES & SUPPORT)
Currency pairs: AUDUSD, USDCAD, EURJPY, NZDUSD and EURCAD
Timeframe: Any

Note: FXCipher is fully automated Forex software, that will do all the hard trading w…

FXCipher EA Review

Happy Breakout EA Review

Happy Breakout EA
Price: €550 (1 LICENSE FOR AN UNLIMITED NUMBER OF REAL & DEMO ACCOUNTS, FREE UPDATES & SUPPORT)
Currency pairs: EURUSD, GBPUSD
Timeframe: M30, H1

Note: With your purchase you’ll get the FULL PACKAGE of 10 Happy Fo…

Happy Breakout EA Review

Trade Explorer EA Review

Trade Explorer EA
Price: $397 (TRADE EXPLORER EA ONE YEAR MEMBERSHIP, 1 LICENCE, FREE UPDATES & FRIENDLY SUPPORT)
Currency pairs: 27 pairs (AUDCAD, AUDCHF, AUDJPY, AUDNZD, AUDUSD, CADCHF, CADJPY, CHFJPY, EURAUD, EURCAD, EURCHF, EURGBP, EURJPY…

Trade Explorer EA Review

Happy Gold EA Review

Happy Gold EA
Price: €349.30 (Discounted Price for Happy Gold EA with 2 LICENSES, FREE UPDATES & SUPPORT)
Currency pairs: XAUUSD (Gold)
Timeframe: M30

Note: STRICTLY LIMITED DISCOUNT – 30% OFF

There are 2 different packages of Happy…

Happy Gold EA Review

FXGoodWay EA Review

FXGoodWay EA
Price: $315 (FXGoodWay EURUSD with 1 LICENCE, 2 MODES, FREE UPDATES & SUPPORT)
Currency pairs: EURUSD, USDCHF
Timeframe: Any

Note: There are 2 different packages of the FXGoodWay Robot available right now:

– FXGoodWay U…

FXGoodWay EA Review

FXTrackPRO EA Review

FXTrackPRO EA
Price: $445 (FXTrackPRO SUPER with 1 LICENCE, FREE UPDATES & SUPPORT)
Currency pairs: EURUSD, GBPUSD, USDJPY, USDCAD, EURJPY and CHFJPY
Timeframe: Any

Note: There are 2 different packages of the FXTrackPRO Robot available…

FXTrackPRO EA Review

Waka Waka EA Review

Waka Waka EA
Price: $1,800 (WAKA WAKA EA with Up To 10 ACCOUNTS/ACTIVATIONS, FREE UPDATES & SUPPORT)
Currency pairs: AUDCAD, AUDNZD and NZDCAD
Timeframe: M15

Note: LIMITED TIME OFFER – 10% OFF – REGULAR PRICE: $2,000

MAKE MONEY WITH…

Waka Waka EA Review

Best Forex Brokers 2023

The Ultimate Guide To Choosing The Best Forex Brokers In 2023
Forex trading has become a popular investment opportunity for many individuals and institutions, making the market highly competitive. With the vast number of Forex brokers available, i…

BEST FOREX ROBOTS | FX EXPERT ADVISORS | FOREX EA’S - BESTFOREXROBOTS.COM

Best Forex VPS 2023


Note: ForexVPS.net – 15% OFF on all Forex VPS plans – Use the following COUPON CODES:

– BASIC PLAN: 15STARTBASICUSD
– BASIC+ PLAN: 15STARTBASICPLUSUSD
– STANDARD PLAN: 15STARTSTANDARDUSD
– HIGH FREQ PLAN: 15STARTHIGHFREQUSD
The Ultimate Gui…

Best Forex VPS

Get More Information And Read The Following Product Review!

Understanding Transaction Costs - Spreads and Commissions

Contents

Understanding Transaction Costs – Spreads and Commissions

One of the advantages touted for Forex, and often by the brokers themselves, is that there are no commissions, a statement which can deceptively lead most newbie traders into thinking that the trading forex is virtually free of charge. For the most part, unless you are trading with an ECN (Electronic communication network) broker (which does charge a small commission in exchange for a tighter spread), there are no commissions. But this does not mean that you can conduct trades free of charge. There is no free lunch.

Brokers have built in a more subtle transaction cost in the form of spreads, and if they are ECN Brokers, they also charge commission, as we shall see.

What Is A Spread?

A spread is the difference between the “ask” and the “bid” prices of a broker’s currency quote. Spreads are normally collected by the broker as a fee for executing an order.

Spread = ask price – bid price

Instead of commission, the spread becomes the broker’s fee for executing the trade.

Let us look at a snapshot of a MT4 market watch (4 digit broker), which displays all the currencies, along with their bid and ask prices:

marketwatch

From the example above, we can dissect the top three pairs to see their spread:

Pair: Bid / Ask Spread Meaning
USD/CHF 1.0536 / 1.0538 2 pips You can buy USD/CHF at 1.0538, sell it at 1.0536, and pay 2 pips
EUR/USD 1.2923/ 1.2924 1 pips You can buy EUR/USD at 1.2924, sell it at 1.2923, and pay 1 pip
GBP/USD 1.5306 / 1.5308 2 pips You can buy GBP/USD at 1.5308, sell it at 1.5306, and pay 2 pips

You see that most of the majors are between 1-3 pip spread, which is not much of a transaction fee (or handicap) to overcome.  However, if you look down at the bottom of the above table, you will see that the EUR/AUD has a spread of 7 pips (1.4839 – 1.4832=0.0007), which makes this pair a much tougher pair to trade, for the instant the trade is executed, you would be down -7 pips.  Generally, we want to trade pairs that have a spread lower than 5 unless there are solid mitigating reasons not to.

If you were to sign up with Introducing brokers who offer a rebate like http://www.CashBackForex.com, you would earn a percent of the spread back to your account for every trade, which would considerably lower the spread-transaction cost.

Your ultimate transaction cost formula would look like this (For All brokers listed with Cashbackforex):
Transaction Cost = (Spread + Commission) – Cashback Forex Rebate 

 

Tools And Websites To Easily View, Track And Compare Spreads

MT4 Indicators:

There are MT4 indicator tools out there that can be inserted on a currency chart to easily display the real-time and sometimes historical spreads of that chart’s currency pair.

Here are a few that we like:

Indicator Descriptor
StatMonitor_1.1Phat-.mq4 Displays Spread, Buy/Sell Swap, Volume of chart symbol.
FXRM Spread History.ex4 Tracks current spread, max spread and plots spread history.
Multi Pair Spread Monitor.mq4 Tracks current spreads of multiple pairs.
Display Info All Pairs.ex4 Author: Hanover. Displays valuable information on multiple pairs: Pair Abbreviation [Column1], Bid Price [Column2], Ratio of Day Range to Average Daily Range (also as a %) [Column3-5], Spread ( also as % of ADR) [Column6-7], Pip Value [Column8], Buy Swap Rate[Column9], Sell Swap Rate [Column10].

 

Websites That Track And Compare Broker Spreads

There are also websites that compare different brokers’ spreads, real time and historical, across a number of currency pairs, such as:

Website Descriptor
http://www.fxintel.com/live/ 28 brokers. Live spread dashboard. Side tools: a) avg spread last 12 hrs/days for selected brokers; b) best 4 spread brokers.
http://www.mt4spreads.com/ 23 brokers. Live spread dashboard. Drill down into pairs: average spread history (nice!). Side tools: find best spread for session or time frame.
http://www.mt4i.com/spread/symbol.aspx 21 brokers. Symbols View: Specific pair spread reporting between brokers over last week (min, avg, max — overall and each session).
Broker View: Broker View: spread reporting of selected broker for all pairs over last week (min,avg,max — overall and each session).
http://www.myfxbook.com/forex-broker-spreads 65+brokers. Live spread dashboard. Drill down analysis into pairs: average spread history (nice!), along with session averages and changes(nice!), and brokers with better spreads(nice!). Best: more brokers with deeper and more visually appealing drill down analysis.

 

Spread Costs And Frequent Trading

It should be noted that the spread transaction costs of trading Forex can mount up with frequent trading, so if your system calls for frequent trading, you want to make sure it has the ability to overcome these transaction costs. Factoring in spread costs into most seemingly good systems can quickly reveal them to be failures. Fortunately the MT4 backtesting program (called Strategy Tester) already factors out the spread costs (or at least the spread at that moment of backtesting), and this spread factoring feature is an important reason why it is so difficult to create a successful looking MT4 EA in backtesting, let alone in forward testing. And if your system is a scalping system that depends on the very tight spreads for its performance, it will be a failure if the broker can vary these spreads during those sessions that the scalping system is geared to exploit.

Case in point
: there had been many Asian scalping EAs created in 2009-2010 on ranging pairs (EURCHF, EURGBP) but most failed when spreads doubled on these two pairs during the session.

Is It Better To Trade With A Forex Broker With Fixed Or Variable Spreads?

There are advantages and drawbacks with both types of brokers.

There are dozens of fixed spread brokers out there, and I have seen a few with a fixed spread as low as 1 pip on EUR/USD. The advantage of this setup is obvious: traders feel that they can retain the fixed low spread all the time, even during times of market volatility such as during an high impact news event, where variable spread brokers might increase the spread to offset the volatility risk.  Traders may even get the fixed low spread during low liquidity periods such as the Asian session, where variable spread brokers typically increase the spread to offset the liquidity risk. However, some fixed spread brokers will quote wider spreads during quiet periods such as during the Asian session (e.g., if they are 2 pips on EUR/CHF during the day, they are 4 or 5 pips during the night), and also during news announcements. If fixed brokers change the spread during night or news, they will warn about it on their website. Every serious shakeout in the market: news, economic shifts or other global events will immediately cause fixed spreads to expand, unless a broker promises to never widen a spread. If you are interested in fixed spread brokers, check the spread policy before you enter with it.

Lately there has been a rising number of variable broker spreads. Variable spreads can be costly. Variable spreads will vary depending on the market volatility and liquidity. Higher volatility — higher spread, lower volatility — lower spread. Under the normal course of the day, the currency pair might have normal volatility and thus spread remains fixed, but when volatility increases volatility increases due to news or geopolitical events the spread can be increased, perhaps going from a 2 pip spread to 4-6 pip spread, or even 20 pip spread if the news event is powerful enough. At the same time: higher liquidity – lower spreads, lower liquidity – higher spreads. The EUR/USD is a good example of a higher liquidity currency that also has lower spreads (sometimes around 1.5 spread), and the EUR/AUD is an example of a currency pair with lower liquidity and higher spread (often around 15 pip spread).

Be on guard against the spread bait of “as low as” spread (e.g., GBP/USD spread “as low as” 1 pip) to lure traders into such a bargain. Whilst these “as low as” spreads might be surprisingly low, you will probably never end up trading with these spreads because they will happen for a couple seconds in a 24 hour period.

Instead of looking at the “as low as” spread, focus instead on the “typical” spread reading, sometimes posted by the broker themselves. The “typical” spread reading should be good most of the time, but sometimes the definition of typical can be vague.

Better yet, try to get an average spread. It is much fairer because it takes into consideration every pip fluctuation throughout the trading day. Few brokers display average spread pricing, so it is a good idea to plot the average spread with the tools and websites posted above.

ECN Providers That Lower The Spread And Add Commission

Some brokers, called ECN brokers (Electronic communication network), collects the best price feeds from a few investment banks and attempts to show the very best bid or offer. They charge a commission instead of marking up the raw spread in order to let their clients trade on prices closer to bank’s own price. Thus, the foremost advantage of trading with an ECN broker is the noticeable spread difference. But there is a catch (see note below).

Note: With ECN broker one must factor in the spread cost in addition to the commission, though the spread + commission might be lower than what is spread of a typical Market Maker Broker or many Straight Through Processing (STP) Brokers. Moreover, there is a second advantage. Throughout volatile times (or low liquidity periods) an ECN forex broker will try to show the very best price obtainable, instead of marking up a spread to offset risk.

The disadvantage with ECN brokers is that you can be deceived into a thinking that you have a low transaction cost when in fact you might have the same or higher than other brokers. Since we have all been trained to look at the spread, we may be tempted to go with the ECN broker with the lowest spread. However, the commission cost added to each trade can make an ECN broker much less attractive than some of the more competitive STP Brokers that have low spread without commission. For instance, you might see that an ECN broker has a spread of 1 on EUR/USD, but when it also adds a commission of $1 per 10,000 lot, then you are in effect trading with a broker that has a 2 pip transaction cost.

It is thus imperative if you are searching for a good ECN broker to investigate both the average spread and the commission cost, and add them up. Sometimes the search can pay off: there are some good ECN brokers out there that do in fact have the best transaction costs (spread + commission) in the forex business.

For ECN Brokers

Transaction Cost = Spread + Commission

ALSO ON BEST FOREX ROBOTS | FX EXPERT ADVISORS | FOREX EA'S - BESTFOREXROBOTS.COM

  • How to Start Forex Trading
    How to Start Forex Trading
  • Best Hours, Days, Months to Trade
    Best Hours, Days, Months to Trade
  • What Is Forex Trading?
    What Is Forex Trading?
  • Leverage, Lots and Margin
    Leverage, Lots and Margin
  • Reflections of a Trader in the World of Stocks
    Reflections of a Trader in the World of Stocks
  • Golden Pickaxe EA Review
    Golden Pickaxe EA Review
  • Author Hanover
  • Best Trading Forex Platform
  • Bid Ask
  • Buy Sell Swap
  • Buy Swap Rate
  • Displays Spread
  • ECN
  • ECN providers that lower the spread and add commission
  • EURCHF
  • EURGBP
  • Forex
  • Forex Forex
  • Forex Robots
  • Forex Robots That Work
  • Forex Trading Robots
  • free
  • Free Forex School
  • Free Forex Trading Account
  • How to Forex Trading
  • Is it better to trade with a forex broker with fixed or variable spreads
  • MT4
  • Robots
  • scalping
  • Spreads and Commissions
  • Strategy Tester
  • Symbols View Specific
  • Tools and Websites to Easily View Track and Compare Spreads
  • Transaction Costs
  • What is a spread
BEST FOREX ROBOTS | FX EXPERT ADVISORS | FOREX EA’S - BESTFOREXROBOTS.COMPrevious

Overnight Interest, Rollover, or Swap Rate

BEST FOREX ROBOTS | FX EXPERT ADVISORS | FOREX EA’S - BESTFOREXROBOTS.COMNext

Pips and Profits

BESTFOREXROBOTS.COM On Facebook

BESTFOREXROBOTS.COM On Facebook

BESTFOREXROBOTS.COM Broker Rebates

Cash Back Forex Broker Rebates

BESTFOREXROBOTS.COM Trending News

BESTFOREXROBOTS.COM Latest Reviews

  • Best Forex Robots
  • Tags
Best Forex Robots
Tags

BESTFOREXROBOTS.COM Trending News

BESTFOREXROBOTS.COM Recommends

  • Best Forex Books
Best Forex Books

Copyright © 2008-2023 - BEST FOREX ROBOTS | FX EXPERT ADVISORS | FOREX EA'S - BESTFOREXROBOTS.COM

Don`t copy text!