When you start to get interested in the world of trading, one of the first questions that should come to your head is: what commissions does a broker charge?
Below is a list of some of the more typical trading costs to consider.
Not all brokers charge a fee for a particular service or product and some are higher or lower than others. There may be other additional or hidden charges that are unique to a broker, so it’s worth reviewing the terms and conditions of each to be sure.
The most common type of brokerage fee is the spreads on each instrument we trade. The spread is the difference in value between the purchase price (ask price) and the sale price (bid price) of an asset. It is also known as the bid-ask spread and it varies greatly between brokers and asset classes.
You can see the spreads of the different instruments on the broker’s own website or through the trading platform.
➣ For example, in the MetaTrader trading platform you can see the buy and sell prices of different asset classes through the Market Watch window (Ctrl + M):
You can also see the spread by selecting the “New Order” option on the chart of the instrument you want to trade. This will open an order ticket in which you will see the purchase and sale price of the asset.
The spread can be calculated by subtracting the ask price from the offer price. In the image above, in the case of EURUSD, the difference between the two prices is: 1.21996 – 1.21987 = 0.00009.
As a move of a pip in EURUSD is 0.0001, the previous spread is 0.9 pips.
If the market moves 0.9 points in the chosen direction when opening the position, then you would find yourself at a “breakeven” level, since the spread value would have been covered.
↳ Any price difference that goes beyond 0.9 pips is a potential profit, as long as it is in the direction in which we have opened the trade.
And now, how do you know if your broker’s spreads are the best or the lowest on the market? The only way to find out is to do a trading fee comparison.
Online broker commissions comparison
On July 16, 2019, a comparison test of online trading commissions was carried out and the following table was offered:
As you can see, brokerage fees vary from broker to broker, some higher and some lower.
➣ For example, traders who trade the CFD Dow Jones (Contract for Difference) would be paying up to 200% more spread if we compare the broker with the lowest spread to the highest. That is a significant impact on anyone’s earnings!
Commission per operation
In addition to the spread, there may be an additional trading fee for each transaction made.
Many brokers offer ECN (Electronic Communication Network) and STP (Straight Through Processing) trading accounts where traders can trade directly with the broker’s liquidity provider (usually top-tier banks). This allows users to get the lowest possible trading spread.
For example, with the Zero.MT4 or Zero.MT5 account, which offer the possibility of trading STP, the commission for each lot traded can range from $ 0.05 to $ 3. However, the benefit of this is that the spreads on these accounts start from 0 pips! If you are interested in opening an account, you can see all the types of account that we offer with their different characteristics by clicking here.
In addition, you can calculate the commission that you would have to pay with this type of account with the help of the table in our Calculation of commissions section. There are also practical examples so that you don’t have any doubts!
For a traditional type of Forex account, such as a Trade.MT4 account, there are no Forex fees, just spreads and swaps.
On the other hand, in CFDs on stocks and ETFs, stock market commissions of a percentage of the total value of the shares that are being traded or per share that are being traded are charged. More details can be found in the Online Stock Trading Fees section further down the article.
The swap can be found directly in the MetaTrader. In the Market Watch section (Ctrl + M), users just have to right-click on the instrument they are interested in and select Specification.
This will open a description window with the Swap values for long positions (buy operations) and Swap for short positions (sell operations).
As we can see in the example, the Swap line for short positions shows us the amount -0.14, which means that the traders will be subtracted the value of 0.014 pips and this will vary depending on the size of the open contract to keep an open trade overnight.
Traders who hold a buy trade open overnight will have to pay 0.721 pips to do so, which will be subtracted from the trading account.