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Unlike other finance markets, Forex markets are preferred by the people. The reason is that it does not promise any exchange fees, commission, any regulatory or data fees. It is good for any novice trader to start up with the business. If there are no transaction fees then trading is attractive to the Forex traders. A Forex broker does not charge any commission. But even he earns out of the trade. Let us have a look on the so called “fees” structure of the Forex broker. After observing them, one should decide which one is suiting him or her.

There are three types of fees/commission structure used by Forex brokers. In one type, the Forex broker offer fixed spread. In another type, a variable spread is offered. And in third type, a commission is charged based on the percentage of spread. A spread is the price difference between the price at which the currencies are bought and the price at which the currencies are sold. In fact it is a difference between a ‘bid price’ and ‘ask price’.  Take an example where the quote given is “EURUSD – 1.4952 – 1.4955.”Here the spread is calculated to be 3 pips i.e. the difference between the given ask and bid price. Now if one wants to consider the first type as given below i.e. fixed spread, he shall always receive 3 pips irrespective of the trade. Here the Forex broker shall offer the fixed spread irrespective of the volatility of the Forex trading market.

In second type, i.e. variable spread, the customer shall receive a range of spreads. It can be as low as 1.5 spreads and as high as 5 spreads. Here the received spreads depend upon the currency pairs to be traded and the volatility of the Forex trading market.

When a Forex broker charges for some commission, he charges like one tenth of one pips. Then the order is passed to comparatively bigger broker who has good relations with the earlier broker. Here the customer may experience a tight spread which only big Forex traders can observe.
One has to understand his requirements and then analyse all the types given above. There are many other factors which play an important role. Thus it is difficult to say which trading account is suitable or which type is favourable. A Forex trading market is highly volatile market. Banks and initial market makers have good relations with other banks (bigger) and price aggregators. These price aggregators are retail online Forex brokers. Thus, a Forex broker’s efficiency depends upon his relationships with other important factors as well as how much volume he has with him. Generally the Forex traders who have high volumes, quote tight spreads.

Posted in: forex trading by BobS / Tags: Forex broker, forex trading, fx broker, trading Forex