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Is this normal brokerage fee?

  • #1
  • First Post: Jan 13, 2010 11:25pm Jan 13, 2010 11:25pm
I'm totaly new to Forex but I love to read these forums. I've been trading equities and Futures but didn't have a clue about Forex until recently. One day after reading a lot here, I thought I would check out Forex and set me up a demo account. I started practicing with the MT4 platform.

To my amazement, every time I opened a position I was automatically negative -40.00 for one lot. My broker says that this was to cover the brokeridge fee and pretty much standard for Forex. $40.00??? OK, I understand that, but it only costs me about 5.00 per round trip trading Futures with a potential profit of 5.00 to 18.00 per tick, per contract, depending on which instrument I use.

So I'm asking myself, why pay $40 for $10.00 per pip and have to gain 4 pips just to break even when with Futures I can actually make a profit from just one tick? Am I missing something?

I don't mean to be negative. Just an honest question.
  • #2
  • Jan 14, 2010 1:15am Jan 14, 2010 1:15am
Quoting brusher
I'm totaly new to Forex but I love to read these forums. I've been trading equities and Futures but didn't have a clue about Forex until recently. One day after reading a lot here, I thought I would check out Forex and set me up a demo account. I started practicing with the MT4 platform.

To my amazement, every time I opened a position I was automatically negative -40.00 for one lot. My broker says that this was to cover the brokeridge fee and pretty much standard for Forex. $40.00??? OK, I understand that, but it only costs me about 5.00 per...
You probably got a rep that didn't know what they were talking about. What you're seeing is in all likelihood the spread. For ex., if trading GU with a 4 pip spread, you're of course going to be -4 pips (-$40 on 100K lot size) right off the bat. What pair are you trading? What broker? Most MT4 brokers don't charge commission.

Could be something else, but sounds like the spread is all...
  • #3
  • Jan 14, 2010 1:48am Jan 14, 2010 1:48am
Thanks for the responce. I was trading the GBPUSD. I think he actually might have called it the spread. I may have interpreted it differently as commission because it sounds basically like the same difference. Isn't it?

Sorry to sound so niave, it's just because I am when it comes to Forex.
  • #4
  • Jan 14, 2010 8:18am Jan 14, 2010 8:18am
Quoting brusher
Thanks for the responce. I was trading the GBPUSD. I think he actually might have called it the spread. I may have interpreted it differently as commission because it sounds basically like the same difference. Isn't it?

Sorry to sound so niave, it's just because I am when it comes to Forex.
Yes and no re. commission. Brokers that say "no commission" are making money by padding the spread, BUT there is always a spread in forex, even if they don't mark it up at all.

An unmarked up GU spread might be maybe 1.5 pips for example, something that you might see at a broker that charges a commission instead of padding the spread. Every so often you can see zero spread on EU, sometimes even inverse, but that's usually only for a second or two.

Spreads vary based on the pair traded. EU is typically lowest; something like GBP/SEK (Pound/Swedish Kronor) might be hundreds of pips around news announcements.

Hope that helps!
  • #5
  • Jan 14, 2010 9:29am Jan 14, 2010 9:29am
You really shouldn't be trading Forex if you weren't even aware of what the spread is ... I hope you're not planning on starting out trading 100,000 lots anytime soon with a live account.
  • #6
  • Jan 14, 2010 10:10am Jan 14, 2010 10:10am
Quoting brusher
I'm totaly new to Forex but I love to read these forums. I've been trading equities and Futures but didn't have a clue about Forex until recently. One day after reading a lot here, I thought I would check out Forex and set me up a demo account. I started practicing with the MT4 platform.

To my amazement, every time I opened a position I was automatically negative -40.00 for one lot. My broker says that this was to cover the brokeridge fee and pretty much standard for Forex. $40.00??? OK, I understand that, but it only costs me about 5.00 per...
brusher,

Time to educate yourself. Forex trading involves a lot of risk and while the markets can be very rewarding, you first must understand them.

Take some time and go to www.babypips.com. You'll be able to learn all the basic and terminology there.
  • #7
  • Jan 14, 2010 12:18pm Jan 14, 2010 12:18pm
Quoting kibescorp
You really shouldn't be trading Forex if you weren't even aware of what the spread is ... I hope you're not planning on starting out trading 100,000 lots anytime soon with a live account.
He said several times he was brand new to forex and trading a demo account...feel free to ask your questions brusher.
  • #8
  • Jan 14, 2010 8:49pm Jan 14, 2010 8:49pm
Thanks a lot for the info TC. It's really nice of you to take the time. So do you pretty much just ignore the spread when placing a trade? I mean it moves around so fast and all.

Thanks jleblang. I will definately check out Baby Pips. Maybe they will answer all my questions. I know one thing, I really like the way the Forex market moves. Gets wild and wooly sometimes.


kibescorp, nevermind.
  • #9
  • Jan 14, 2010 9:49pm Jan 14, 2010 9:49pm
Quoting brusher
Thanks a lot for the info TC. It's really nice of you to take the time. So do you pretty much just ignore the spread when placing a trade? I mean it moves around so fast and all.

Thanks jleblang. I will definately check out Baby Pips. Maybe they will answer all my questions. I know one thing, I really like the way the Forex market moves. Gets wild and wooly sometimes.


kibescorp, nevermind.
No problem. Re. spreads, that is usually a big criteria when selecting a broker, so assuming I've done my homework I know what to expect when I go live. I presume you're demo'ing a variable spread broker rather than fixed spread one?

Spreads may bounce around a lot, but usually they stay within the same general range, unless right at a news announcement, at which time they widen considerably. Also, the Asian session often sees spreads widen some due to less liquidity in the market.

So I don't ignore spreads, but generally know ahead of time what I have to work with depending on when I trade, what pairs, etc. Being brand new to forex, you might start off demo trading EUR/USD, as it has lowest spread, is the most liquid pair, and typically "behaves" better than most pairs when applying technical analysis.

But yes, babypips is a good education re. general forex stuff, just don't take what they say to heart when it comes to forecasting price movements. They make it sound like it's just step 1, 2 & 3 and you're profitable, and of course it's usually not that easy.

Best wishes!
  • #10
  • Last Post: Jan 15, 2010 3:11am Jan 15, 2010 3:11am
I'm using InterBank. I have no clue how they stack up to others. I just noticed a lot of people around here use them so that's what I went with. Haven't funded yet though. I got a lot of practice and learning to do first.

Thanks again for your help.
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