Spreads or Commissions, which is better?

Once you are done with selecting the broker with whom you will start your Forex Trading, the next thing is to decide which type of account you should have. The Forex Brokers offer two types of accounts Spread and Commission account. Here are few things which you should keep in mind while choosing the account type.

Spread Account: In this type of account you will not be charged any commission for opening a trade but you pay the spread i.e. the difference between the Bid and Ask price. Now this is a trick of the brokers to get you in by saying that there are no commissions for the trades but don’t get charmed by it as there is a mark-up which the brokers keep in their prices to get their earnings which could be even 1 pip to 3 pips also. I have experienced the same by opening a spread and a commission account with the same broker. They might be promoting 0.0 pip spreads in their ads but for the Spread account every broker has a certain mark-up. In this scenario your profits might be delayed a bit. If you have a small account or Trade smaller lots then this type of account is recommended for you. Especially if you are a day trader or a scalper trading smaller lots and the pip value is lesser.

Commission Account: In this type of account you pay a certain commission to the broker for the trades you open. For instance the broker I trade with charges USD 3.5per trade for a standard lot i.e. USD 7 round turn commission on a USD 100,000 position. It can also be taken as USD 0.0007 per 1 USD you trade. I would recommend this account to those who open bigger positions i.e. 1 standard lot or more per position. In this case your pip value is higher approx. 10 USD per pip. If you are a Scalper or Day trader you can easily override your commission with a 1 pip move (In case of my broker). In this type of account you actually have tight spreads as every Forex Broker tells you. They can even give you a 0 spread in this account as per the market situation because you are already paying them commission so they need not add any mark-up to earn from you.

Summarizing the whole thing if you are a small trader or trade small volumes Spread account is good for you. If you Trade big volumes it is better to have a Commission account. This is not a thumb rule but a recommendation based on my own personal experience.

I always say before entering the market do a good research on everything which affects your profits in Forex Trading and actually everything from choosing a broker to entering your Trades does affect your profits in the Forex Trading market so, always be care careful before taking a step in this market.

LUCRATIVE OFFERS

While doing your research for choosing a Forex Broker you might come across many attractive offers which they might be offering. Don’t ever get attracted by those offers and do analyse the actuals behind that. For e.g. a Forex Broker says that we are giving you a rebate of 1 USD per 100K USD you Trade, but he might have already adjusted the same by increasing the commission or Spreads. So, their Commissions or Spreads might be higher than any other Forex Broker in the Market. Similarly a broker might offer you free Trading Signals or a free Subscription to the daily updates of the market but the same is to hide their high spreads or commission.

There might be X number of offers being spammed in your mailbox by these Forex Brokers or flashed High on their website, But never ever fall for them. Always go for the real thing that is actually going to affect your profits while you are enduring to win your Forex trading Heist.

Always keep your eye on the actual features of the Forex broker. See that if he is a ECN Broker or a market maker, what leverage is offered, what are the spreads, how much commission they charge per trade, what is the minimum account size, do they allow News Trading, are they good with Scalpers, how many currency pairs they are offering?

Do read the reviews about the Forex Broker on various Forums and the Social media sites. This will help you in making the right decision or choosing the right weapons for your Forex Trading fight.

Always remember there is nothing like a free lunch, you have to pay a price for everything in the Financial World you might realise it or not but at the end, it is going to affect your profits. So, always be careful while choosing a Forex Broker and don’t get charmed by the illusive offers they show you as it is just to hide their weakness and get you in the Trap.