Forex Spreads: Fixed vs. Variable vs. Commission
When you start trading Forex, the first thing you notice is that there is no explicit fee that a broker charges you (unless you start with an ECN account). In fact, "no fees and no commission" is a phrase you can often see in Forex related advertisements. Obviously, brokers cannot operate without earnings, so most FX traders get to pay some sort of spread on each trade. Alternatively, a broker may employ commission based on trade volume if its operational model includes raw spreads or zero spreads. Basically, there are three types of fees prevalent in online Forex trading: fixed spreads, variable spreads, and commission. Each has its own pros and cons and can serve well or poorly depending on your trading style.
Fixed spreads — the simplest model, which seems very
Variable spreads — this model makes the ask/bid difference change almost every tick. It also means that traders will normally experience tighter spreads during periods of calm markets. Unfortunately, it will also result in very wide spreads during high volatility or low liquidity periods. This type of trading fees is
Commission — a traditional compensation model for trading intermediaries in
For swing traders, the preference should be given to variable spreads (especially, for chart pattern trading). As was mentioned above, for high-impact news trading, a commission/
If you want to talk about how you prefer to pay for your trades, please proceed to our Forex forum.
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