Spreads

Basically there are two main broker models as it pertains to cost per trade.
Every forex broker on the market is going to have a commission structure based on one of two models. It will be either a raw (or straight) spread and no commission, or a spread + commission structure.

On the surface most people might say they would rather go with just the spread model and pass on paying a commission, regardless the choice isn’t quite that clear and there are a few other considerations .

You need to first understand that no matter if the broker claims they charge a commission or not, you are paying a commission.

It’s just with one model your commission is paid by charging a higher spread on each currency pair, while the other model has a much lower spread and charges a commission.

What you have to do is to take the overall trade cost into consideration. Let’s say for example you are using a broker that has a 3 pip spread on the EUR/USD. As soon as you enter the trade you will be 3 pips down or $-30 dollars on a full lot. Your cost for that trade is $30.00.

Lets take ATC Brokers as an example of raw spread broker. Now with ATC given the same example the spread on EUR/USD is usually less than a pip. Typically between .6 and .9 pips per standard lot. On top of that spread they charge a small commission of 1 pip.

So what is your cost for the privilege of executing a trade with ATC? Well it would be $9 (.9 x $10 per pip) + commission of 1 pip. Total $19.

So when using the straight commission based model you pay $30.00 but when using ATC spread+commission you pay a mere $ 19.00. That is a saving of $11 per trade.

On the surface that may not seem like a lot, but when you are making 50 to 100 trades a month, you’ll quickly see how this can add up so fast.

Raw spread brokers can save you 100’s to 1,000’s of dollars in trade costs every month

Check Forex Spreads Now