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Secret Strategy Pressing Forex Trading Transaction Costs ?

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    Secret Strategy Pressing Forex Trading Transaction Costs ?

    When you will choose a futures broker (more popular as a forex broker), what is the first time you see it?

    What is the spread?
    Is the commission charged for each transaction (the cheaper the better)?

    What is the service?
    Or the ability of the analyst to provide forex trading analysis?

    One (or maybe all) of the things mentioned above might be your consideration.

    Ideally, you really need to get all these things from your chosen broker.

    But regarding the costs that must be incurred to make a transaction, are you sure that your chosen broker has provided the lowest cost?

    Not Only Spreads
    Most traders think that low spread is one of the characteristics of a good broker.

    Not entirely wrong.

    Indeed, small spreads are usually more desirable because the price difference that you have to "chase" to at least get a break event point (BEP) condition for your transaction will be smaller.

    For example, if you make a EUR / USD buy transaction at the price of 1.14100 (Bid) /1.14115 (Ask), then the transaction will be executed at the price of 1.14115 (Ask price).

    At that time you will also experience a floating loss of the current spread, which is minus 15 pips (quote five decimal places).

    That is, you just have to wait for the price to rise as much as 15 pips to get the break even condition (BEP).

    The story will be different if the spread is as wide as - for example - 25 pips. When you buy at the price of 1.14100 (Bid) /1.14125 (Ask), then you have to wait for the price to rise by at least 25 pips to get BEP.

    Do you think like that? Let's think again.

    See also the Commission
    The problem is that spread is not the only thing we have to look at. Please note that all legal forex brokers in Indonesia can certainly charge fees (commissions) for every transaction made.

    This commission is like a "wage" that you have to broker for its services to deliver your transaction to the futures exchange, whether it's the Jakarta Futures Exchange (BBJ) or Indonesia Commodity and Derivatives Exchange (ICDX).

    The two exchanges are futures exchanges that officially operate in Indonesia. All your futures transactions (including when you do forex trading) will be forwarded to one or both of these exchanges.

    This is where you have to be more careful. Why?

    Because commissions are also one of the parameters of the transaction costs that you make. Thus, how to calculate transaction costs is:

    Transaction Fee = Commission Spread

    Which is Cheaper?

    Try to look at the following example:
    Broker A sets a spread of 15 pips.

    Remember this is a spread for quotes with five decimals. If you quote four decimals, this is usually written 1.5 (one point five) pips.

    The commission charged is $ 30 per / lot.

    Let's say you buy 1 lot at the price of 1.14100 (Bid) /1.14115 (Ask). Then that means your transaction fee at that time was 15 pips plus $ 30.

    This means that your transaction fee is $ 45.

    Thus, just to pursue BEP, not the movement of 15 pips you need, but 45 pips.

    Now let's look at the calculation of transaction costs for forex trading on FOREXimf which does not specify fixed spreads, but rather follows the movement of spreads in the market. However, the average spread that often appears is around 25 pips.

    Meanwhile, the commission charged for each transaction is only $ 5 (five USD) per lot.

    Assume you buy 1 lot at the price of 1.14100 (Bid) /1.141125 (Ask). Then that means your transaction fee at that time was 25 pips plus $ 5. This means that your transaction costs are only $ 30.

    Based on the example above, you can definitely conclude which is the cheapest forex broker with the lightest transaction burden.

    So, don't be too easily fascinated by the low spread offered. Also look at how much the total transaction costs you need.

    The cheaper, the better, because it will be faster and easier in pursuing profits

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