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Do forex spreads make a significant impact on the long term trading results?

bellucik
Feb 18 2014 at 22:40
2 Posts
I recently did an audit of my live forex accounts and found something very interesting that I wanted to share and see what other think. To give you some background, I have 2 live accounts, at totally different US forex brokers. I tend to use 1 account to trade swing positions and the other to do interday trades. Since 1 broker offers me around 1.8 pips on eur/usd and the other is 1.2 pips, I tend to keep my daily trading on the lower spread account and figured the higher spread would be fine for my swing trades. However, after looking at my 2013 statements for both accounts something jumped out at me; which was that I would have been about 25% more profitable if I would have traded on the lower pip spread for my swing trades, since each time I traded on that account I was paying about $8 more per 100K I traded. Over the year, this accumulated to over $3500 MORE in trading fees! When I brought this up to my account rep at the broker with the higher spread , he simply pointed out other benefits of being with the company , like features, tools, ect... which means nothing to me if it costs $3500 extra to have things I really dont use or need to be successful in my trading, and when I tried to get back to the point about my spreads, the only solution he offered was depositing more funds into my account which I don't need to do at the other broker to basically get the same pricing anyway. Point is, my experience and trading statements reveal that spreads can be the difference between making profits and possibly even losing money, regardless of how many trades I make, the money adds up! What about everyone else? - BTW dont want to name drop brokers but if anyone wants to know they can message me here.
vontogr (togr)
Feb 19 2014 at 07:18
4862 Posts
Well yes spread is cost of each trade you make. So with high spread the otherwise profitable trade can be losing one at the end.
Also from my point of view the lag or latency could be a the same problem. So execution speed is very important too.
For me as European trader is very important to have also high leverage so I can use my small capital wisely:)

You should go with low spread broker like IcMarkets
0.55 comm + 0.1 spread = app 0.7 spread on EURUSD
[referral link removed]
CrazyTraderfx (CrazyTrader)
Feb 19 2014 at 10:16
1718 Posts
Forex21
Feb 19 2014 at 19:53
416 Posts
togr posted:
Well yes spread is cost of each trade you make. So with high spread the otherwise profitable trade can be losing one at the end.
Also from my point of view the lag or latency could be a the same problem. So execution speed is very important too.
For me as European trader is very important to have also high leverage so I can use my small capital wisely:)

You should go with low spread broker like IcMarkets
0.55 comm + 0.1 spread = app 0.7 spread on EURUSD
[referral link removed]

I like ICMarkets but keep in mind that their spreads are so low because they do a little fore running.
dvejny
Feb 20 2014 at 22:19
2 Posts
ic not open account for usa client. In usa is very hard open account where is spread under 1 pip complete.... too big regulation
best cashback for ic markets 1,6usd. For armada 10%. Best cashback for other 30 brokers.
axforexsignal1
Feb 22 2014 at 09:27
4 Posts
For us citizen you should try fastbrokers or finfx.
RyanGallavin
Feb 26 2014 at 06:33
1 Posts
In fact , many US broker's offer spreads typically less than 1 pip. However, depending on the broker someone trades with, minimum initial deposits may apply like any other location in the world. It's possible due to additional leverage options outside the US , some of those minimums may be lower, but if someone trades with significant capital and trades actively, they SHOUlD be able to find pricing that low. If this isn't the case, they probably haven't looked around that much or asked their broker to make things right. Plain and simple.
berniem
Feb 26 2014 at 06:33
4 Posts
I got .9 at fipfx in the US and now I get .7 at fipglobal. Only opened with 10k
qnguyen
Feb 26 2014 at 06:33
4 Posts
I have this argument with my friends all the time! Spreads are fees , fees=less money than you had before. Yes, spreads make a difference in long term trading, unless of course you lose all your money and there is no long term trading for you at all 😄

It obviously makes a difference then , what pairs you trade, but that's semantics people! id use fipfxglobal
Forex21
Feb 26 2014 at 20:35
416 Posts
I believe the best is if you simple check the brokers spread section here on myfxbook.
icmarketsfx (icmarketsfx)
Jun 22 2014 at 06:49
21 Posts
Spread matters in any situation. You will earn lot more money with a low spread broker.
Get 20% discount on IC Markets
tigpips
Jun 23 2014 at 04:31
186 Posts
a GREAT big deal lol, spread definitely matters, alot.
http://www.freeforexrebates .info
Gabriel Urse
Pureprofitfx
Jun 23 2014 at 06:36
38 Posts
I agree that matters, but the most important things is the execution, meaning No requotes or Sleepage
growthera
Jun 23 2014 at 09:51
86 Posts
It matters enormously. Agree with Gabriel that you must look at TOTAL spread, or whatever you prefer to call it. This is the total cost of execution. For a system that has 5 pips/trade average, and you have a total spread (read:cost) of 2.5 pips/trade, half your profit goes to the broker.
vontogr (togr)
Jun 23 2014 at 12:47
4862 Posts
growthera posted:
It matters enormously. Agree with Gabriel that you must look at TOTAL spread, or whatever you prefer to call it. This is the total cost of execution. For a system that has 5 pips/trade average, and you have a total spread (read:cost) of 2.5 pips/trade, half your profit goes to the broker.

so what would be total cost?
spread + markup + commission + slippage?
growthera
Jun 23 2014 at 14:53
86 Posts
yes, minus maybe some kind of rebate/cashback you may have with that broker.
What exactly do you mean by markup? Some cost on social trading websites or something else?
vontogr (togr)
Jun 23 2014 at 19:58
4862 Posts
growthera posted:
yes, minus maybe some kind of rebate/cashback you may have with that broker.
What exactly do you mean by markup? Some cost on social trading websites or something else?
https://en.tradimo.com/tradipedia/markup/
forex_trader_[107338]
Jun 24 2014 at 11:24
22 Posts
I always did find it difficult to find out exactly how much % wise I am paying in total charges, spread + commission.

Pepperstone charge less commission than ICMarkets but some of their spreads are higher.
Having variable spreads makes the comparison much more difficult as the goalposts constantly move.

Swap rates are also very different on these 2 brokers.
vontogr (togr)
Jun 24 2014 at 11:30
4862 Posts
buster891 posted:
I always did find it difficult to find out exactly how much % wise I am paying in total charges, spread + commission.

Pepperstone charge less commission than ICMarkets but some of their spreads are higher.
Having variable spreads makes the comparison much more difficult as the goalposts constantly move.

Swap rates are also very different on these 2 brokers.

it is quite easy you know the spread e.g. 0.2 pip and the commission 0.8
so your total cost is 1.0 pip
plus some change due to delay from trade request/trade execution - this could be both positive and negative
forex_trader_[107338]
Jun 25 2014 at 09:24
22 Posts
So for example Usd/Jpy, I have a 0.05 position open.

Commission = 23p
spread is flicking from 0.2 - 0.4 (Not sure what it was the moment I opened the trade).

Pepperstone do offer a commission free account where the spreads are larger. Apparently it is the same total cost whichever of the 2 accounts you decide use.

I do get a monthly commission rebate though from a company I signed up with a couple of years back which helps.
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