Cost of trading

Cost of trading thumb

How much does it cost to trade online?

In trading, financial institutions such as online brokers fulfill the important role of bringing buyers and sellers together. This creates a lot of efficiency compared to a situation where every market participant would need to organise their own trades.

This means that thanks to brokers and the Internet, the cost of trading is lower than ever before, allowing traders to enter the market even if they do not have a lot of trading capital.

Still, there is some cost to trading: the brokers and banks need to take money for their services. Usually, this is done by asking for fees in the form of commissions and spreads.

For example, a bank might ask for a $5 fee if one of their customers wants to buy stock market shares of a company through them.

For a trader, managing the cost of trading is an important skill. You need to chose the right broker, where the trading fees are one of the important criteria. If you are new to online trading, we recommend you to read the following article on choosing a broker:

Category
Learn how brokers differ and what you need to know to choose a the right broker for your trading account.

Also, it is important to adhere to the correct money management to protect your trading capital:

Subject
Learn how to use important tools like risk-to-reward ratios and stop losses to maximise your profits and minimise losses.

If you have any additional questions, please do not hesitate to ask them in our forum. Our community and expert traders will be happy to help:

  • How about overnight financing? For instance the following overnight financing is from the broker LCG:

    "Each day at 22:00 London Time (Forex market change time) LCG will settle all FX positions by closing the trades at the current market rate and re-opening them at a rate which reflects the interest rate differential.
    For example, each trade in the case of Forex involves not only 2 different currencies, but their two different interest rates. If the interest rate on the currency you bought is higher than the interest rate of the currency you sold, this positive differential is taken into account. If the interest rate on the currency you bought is lower than the interest rate on the currency you sold, then you will pay rollover.

    For a position held on a Friday or prior to a LCG non-business day, financing will be applied according to the number of days until the subsequent LCG business day. For example, for a position (held on Wednesday) rolled from a Friday to Monday, financing will be applied for 3 days."

    Does that mean I have to pay additional financing of 3 days over a week if I hold my position? That is a really bad deal if I am looking at long term trading.
  • Hi yongchunpower,

    It depends on the broker as each broker will have different deals, however yes, if you hold positions over night you may have to pay an additional premium.

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