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Commission vs Commission-Free Trading

  • Post #1
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  • First Post: Sep 16, 2013 7:16pm Sep 16, 2013 7:16pm
Which do you prefer?

I think I'm going to try out the commission trading for a bit. Seems like I can buy in at a half a pip spread, which seems better than the non commission trading which is generally over 2 pips.
Quoting Baggi
Which do you prefer? I think I'm going to try out the commission trading for a bit. Seems like I can buy in at a half a pip spread, which seems better than the non commission trading which is generally over 2 pips.
It all depends upon the size of your trades. If you're trading small sizes it's usually cheaper to pay the larger spread with no commissions. If trading larger sizes then it's cheaper to pay the commissions to get the lower spread. For scalping it makes it more difficult if you're going for small targets & have a spread that's too big.

Example: (small size of position)
Cost for .01 lot with 2 pip spread & NO commissions= $.20
Cost for .01 lost with 1/2 pip spread with $3 commissions= $3.05

Example: (larger size of position)
Cost for 1.0 lot with 2 pip spread & NO commissions= $20
Cost for 1.0 lot with 1/2 pip spread with $3 commissions= $8
Perhaps it's the math that I'm not getting. This is how TD Ameritrade explains the commissions vs non commissions.

Quote
The Commission based pairs will offer a tighter spread. Commission currency pairs trade in increments of 1,000 and are subject to a fixed-commission structure based in counter currency units. For example, the commission from a 1,000-lot EUR/USD trade would be USD $1 ($1 minimum and/or $0.10 per 1,000 units). The commission from a USD/JPY trade of 5,000 units would be JPY ¥90.

I read this to mean

Purchase 10,000 (Which is the smallest they seem to offer as a micro trade) pay $1.00.
Purchase 100,000 pay $10.00.

In which case, I don't think it matters whether you've got a large buy or a small buy.

Purchase 10,000 and pay the $1.00 commission going both ways and you're out $2.00.
Purchase 10,000 and accept the 2 pip spread and you're out $2.00.

The main difference I see is you still have to pay about a half a pip spread even with the commissions, so it's perhaps a tiny bit more to pay the commissions?
Quoting Baggi
Perhaps it's the math that I'm not getting. This is how TD Ameritrade explains the commissions vs non commissions. {quote} I read this to mean Purchase 10,000 (Which is the smallest they seem to offer as a micro trade) pay $1.00. Purchase 100,000 pay $10.00. In which case, I don't think it matters whether you've got a large buy or a small buy. Purchase 10,000 and pay the $1.00 commission going both ways and you're out $2.00. Purchase 10,000 and accept the 2 pip spread and you're out $2.00. The main difference I see is you still have to pay about...
Example:
1,000 units (1 micro-lot) with 2 pip spread & No commissions= $.20
1,000 units (1 micro-lot) with 1/2 pip spread & $1 commissions= $1.05

Example:
10,000 units w/2 pip spread & No commissions= $2
10,000 units with 1/2 pip spread & $1 commissions= $1.50

Example:
1 full lot w/2 pip spread & no commissions= $20
1 full lot with 1/2 pip spread & $1 commissions= $6

As you can see, it depends on the amount you're going to trade to determine which is best for you.
Commission based trading, ECN, and the spreads are extremely low..and on the charges, depends on the broker. For example, I use both tradersway and FXCM for commission based trading and got to admit, the rates attractive..more lots you trade, the less you get to pay or along those lines.
  • Post #6
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  • Last Post: Apr 28, 2016 8:02am Apr 28, 2016 8:02am
Quoting srt
{quote} It all depends upon the size of your trades. If you're trading small sizes it's usually cheaper to pay the larger spread with no commissions. If trading larger sizes then it's cheaper to pay the commissions to get the lower spread. For scalping it makes it more difficult if you're going for small targets & have a spread that's too big. Example: (small size of position) Cost for .01 lot with 2 pip spread & NO commissions= $.20 Cost for .01 lost with 1/2 pip spread with $3 commissions= $3.05 Example: (larger size of position) Cost for 1.0...
Thank you for the calculation. However my experience is different at IC markets:

Example: (small size of position)
Cost for .01 lot with 2 pip spread & NO commissions= $.20
Cost for .01 lost with 1/2 pip spread with $0.07 commissions= $.12

Am I right?
Cut short your losses. Let your profits run on. David Ricardo (1772-1823)
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