Most forex brokers do not charge commissions. GFT Forex Brokers, like other forex brokers, are compensated by revenues from their activities as currency dealers, including proceeds from buying, selling, converting and holding currencies, interest on deposited funds, and rollover fees.
Many may wonder how brokers work without commissions. The forex dealer is like a middleman. Let's consider the case of a bread middleman. He buys bread at a “wholesale” price and he sells it at a “retail” price. So if one is a baker, he can ask the middleman how much he would buy his bread for. Let's say the middleman quotes $1, so he's willing to pay $1 per loaf.
On the other side of the equation, let's say you just finished his last slice of bread, and you needs a new loaf. So you call up the local middleman, and ask him how much he's willing to sell you (a customer) a loaf of bread for. And he quotes the baker $1.25. That sounds reasonable, so you tell him to drop one off for you.
In this example, the bread middleman didn't charge you a commission to either the baker or you, the customer. Instead he bought at one price and sold at another. He will let you buy from him at $1.25, and let you sell to him at $1. So every time the baker has bread to sell, he checks the middleman's sell price. And when you want to buy a loaf of bread, you check the buy price.
this is known as the “bid” and “ask”. The bid is the price you can sell at, and the ask is the price you can buy at.
Considering forex broker commissions, the forex dealer will let the trader buy from him at 1.1971 and will let the trader sell to him at 1.1967. The difference 0.0004 is known as the spread. And this spread is where the forex “middleman” makes his money.
If the trader were to buy at 1.1971, then the instant the trader buys, he is “down” 0.0004, because if the trader wanted out of the trade, the best price he could sell it for is 1.1967. So as the forex dealer takes varying trades from people, each buying or selling, he can make money from this price gap. Each minimum increment, 0.0001 is referred to as a “pip”. So the spread in this example is 4 pips. In terms of dollars, for a forex contract of $100,000, this transaction would cost you $40 ($100,000 x 0.0004) or 4 pips. So the trader will find that some companies will advertise a spread of 3 pips on some currencies, usually ranging up to five on others. In forex trading, the tighter the spread is, the better.
Forex Broker Info provides detailed information on forex brokers, forex trading and market makers, and other forex-related topics. Forex Broker Info is the sister site of Incorporating in Florida Web.
All The Truth Around E Currency
You keep on listening about this profit pulling business that
requires no marketing or selling, merely an hour a day (at the
most) and no special skill.
At least that's the 1st perspective it gives any person that has
An Open Invitation To Frustrated Forex Traders That Desire Unlimited Success In The Market - Part 1
Why does one Forex traders succeed and another fail? What sets
the winners apart from the losers? Well, you won`t be surprised
to know that there are certain characteristics that all
successful Forex traders share. While many investors...
Energy Prices, Inflation and Forex
Oil futures surged to a record intraday high of $70.85 on August
30th, the day after Hurricane Katrina made landfall on the Gulf
Coast. While prices have moderated in subsequent weeks, it's
worth examining how higher commodity prices and the...
Factors Influencing a Currency Pair Exchange Rate
Introduction The exchange rate refers to the value of the US dollar against the values of currencies of other countries. Such a rate helps determine how much we pay for imported goods and services and how much we receive for what we export,...
How to Profit From Ben Bernanke & a Volatile Federal Reserve
President Bush has nominated Ben Bernanke, his chief economic
advisor, to replace Alan Greenspan. Bernanke has the credentials
to be a good Fed chairman, and the market spoke favorably of him
on the day of his appointment. (More on Bernanke...
Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest / trade in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading.
** The Views and opinions represented in the provided website links and resources are not controlled by the Referring Broker or the FCM. Further, the Referring Broker and the FCM are not responsible for their availability, content, or delivery of services.