To be a qualified person, you should know the revenue and cost of each transaction.
When it comes to the cost of speculation, everyone is well aware of commissions.
But when it comes to fees, many traders remain indifferent.
Because different platforms may give different cost descriptions, some say cost price directly, others separate commission from spread.
The spread is the difference between the bank’s sum.
For us, as opposed to the banks, the spread is calculated using the bid-ask price.
How to Calculate Transaction Costs in 1S If you want to calculate costs, simply add the commission and the point spread.
At this point, we need to convert the point difference to US dollars.
For example, the point spread given by platform A is 2 and no commission is charged. The point spread given by Platform B in euro is 1.6 and the commission per lot is 5.
At this point, it is necessary to decide which platform has the lower cost.
Convert THE COMMISSION TO THE POINT SPREAD, BECAUSE A STANDARD FOREX IN ONE HAND MEANS $100,000, AND A STANDARD FOREX IN ONE HAND MEANS $0.0001, SO A POINT IN ONE HAND MEANS $10.
A $5 hand is equal to 0.5 points, and the total spread on platform B is 2.1 points.
Although on the surface, platform B has A smaller point spread, Platform A has A lower cost after switching commissions.
So you need to master the ability to quickly switch commissions and spreads, and calculate total transaction costs.
In fact, on the same trading platform, we will also face the choice of different trading varieties.
The point spread is different for different trading types. In addition to the spread, we also consider the volatility (the difference between the maximum and the minimum).
Some pairs, such as EUR/USD, have the lowest spread and low volatility, making them ideal for beginners in foreign exchange.
The GBP/USD point spread is relatively large, the volatility is larger, and the trading risk is larger.
If we are faced with a large spread, SMALL volatility and a SMALL spread, LARGE volatility, we can use the point spread/volatility ratio to measure trading costs.
Fixed point difference and floating point difference As the name implies, fixed and floating point difference is fixed or floating.
In general, market makers use fixed point spreads, while brokers use floating point spreads.
The advantage of choosing a fixed spread is to reduce risk without having to worry about large market movements.
We can calculate transaction costs in advance.
The downside, however, is that the average market maker’s market is relatively illiquid because trading costs are fixed.
In large markets, the platform may not be able to handle the spread becoming so large that orders cannot be traded.
Floating point spreads have the disadvantage of being unstable.
When markets are large, spreads can widen.
But the advantage is that, in general, trading in markets with floating spreads is relatively smooth, and the more frequently the market trades, the smaller the spread.
When sharing a trading platform, we recommend that you choose a broker.
Most short-term traders are also better suited to liquid floating spread betting.
Of course, if you’re a conservative, you can also choose to fix the spread.
