Brokers and Commissions

Filed under: Learn Forex Trading |

Screen shot 2013-08-14 at 10.05.01When choosing a forex broker and the type of account you sign up for with them, you should consider whether there will be any commissions involved in your trades or not. However, just because there are no commissions, or vice versa, does not necessarily mean that it is better for you. Let’s explore this issue further by examining my broker, Go Markets.

 

Go Markets currently offer a ‘standard account’, and a ‘pro account’. For the standard account, there is a $500 minimum deposit, spreads from 1.2 pips, and no commissions. However, recently, Go Market’s have been pushing the ‘pro account’ to me. For the pro account, there is a $3000 minimum deposit, spreads from just 0.4 pips, and $3.50 commission per one lot traded. So what does all of this mean?

 

Well, let’s say you are aiming for $100 profit on a trade (trading 1 standard lot), and you aim to make 10 pips profit with a spread of 2 pips. That is 20% of your profit, or $20. If you had a pro account with this trade, your spread might be just 1.2 pips, costing you $12, plus the $3.50 commission, which is $15.50 – not a lot better, but marginally better which could add up over a long series of trades.

 

However, if you are trading the larger timeframe charts, your $100 profit target (trading 0.1 lot) might include an aim of 100 pips profit, with a spread of 2 pips on a standard account. This would cost you just $2. However, on a pro account, it might cost just 1.2 pips, or $1.20 plus $3.50, which is $4.70 – which significantly worse.

 

I think, overall, that having a pro account in this case would only be beneficial if you are trading the lower timeframe charts, as this is where the spread tends to eat up your profits. If you are a long-term trader, there is probably no benefit at all, and in fact, having a pro account could even be detrimental to your trading account. So before you decide which kind of account to go for, do your math, and work out which kind of account is best for you.

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