NatureGirl
Corporal
- Messages
- 89
saw some commission free brokers but didn work with any of em. have U ever worked one? whats Ur opinion bout em?
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Discuss Commission free brokers
- Thread starter NatureGirl
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- Tags
- brokers commission
General discussions of a financial company
Scam Reporters
Sergeant Major
- Messages
- 650
Commission free is not all that free in reality. It is mainly stocks trading, actually CFDs on stocks. Low commission would be much more accurate description and basically a cheap option to trade. No commission would be misleading marketing and advertising, done by many brokers out there.
As an example, eToro was fined 1.3mn eur by Italian watchdog few days ago, because of such claims. Turns out there were fees after all, thus retail clients were misled.
No such thing as free lunch.
ImogenBeaumont
Private, 1st Class
- Messages
- 42
Keep in mind that while commission-free trading may be attractive, it's essential to consider other factors such as account fees, trading platforms, research tools, customer service, and available investment options when choosing a broker that best suits your needs.
NatureGirl
Corporal
- Messages
- 89
how do you define commission? AFA i know many brokers will charge their clients a certain amount of money for each position and i consider that as a commission
NatureGirl
Corporal
- Messages
- 89
yeah IK but im askin bout commissions right now. BTW what do U mean by account fees? U mean deposit or withdrawal fees?
Pharaoh
Brigadier General
- Messages
- 20,309
Simple rule - even the most honest broker in the world has to make money. One way or another, clients have to pay to trade.
Honest forex brokers have 2 main methods to extract money from their clients:
1. Commissions for opening and closing positions. A true ECN broket that actually passes on the exact spread the broker gets from its liquidity providers needs to do this. Quite a few fake ECN brokers (that have no actuual LPs) also do this. Be VERY wary of any claimed ECN broker that doesn't charge commission.
2. Spread markup. Even if trades are passed to an LP, the broker can add something to the spread. This is the most common way that an honest commission-free forex broker makes money.
There are other ways - Have you ever seen swap cost money on both short and long trades you hold overnight? That's the broker adding profit on top of the spread it pays (assuming the broker is actually passing your trade on to the real market).
Imagine you're an honest broker, but you have software to "match" trades between clients. Trade A goes long on 2 lots of EURUSD. Trader B goes short on 1 lot. As long as both trades are open, the broker only needs to pass 1 lot long to the market. The commissions/swap for the match trade opening goes straight to the broker's pocket, as is the net swap charged for 1 lot long and one short. There are entire backend systems to allow a broker to calculate and only pass on the unmatched net positions of all clients to an acutal LP.
Of course, dishonest brokers can do anything from giving traders extra slippage all the way up to confiscating all the money in a trader's account for no reason other than a withdrawal attempt.
Honest forex brokers have 2 main methods to extract money from their clients:
1. Commissions for opening and closing positions. A true ECN broket that actually passes on the exact spread the broker gets from its liquidity providers needs to do this. Quite a few fake ECN brokers (that have no actuual LPs) also do this. Be VERY wary of any claimed ECN broker that doesn't charge commission.
2. Spread markup. Even if trades are passed to an LP, the broker can add something to the spread. This is the most common way that an honest commission-free forex broker makes money.
There are other ways - Have you ever seen swap cost money on both short and long trades you hold overnight? That's the broker adding profit on top of the spread it pays (assuming the broker is actually passing your trade on to the real market).
Imagine you're an honest broker, but you have software to "match" trades between clients. Trade A goes long on 2 lots of EURUSD. Trader B goes short on 1 lot. As long as both trades are open, the broker only needs to pass 1 lot long to the market. The commissions/swap for the match trade opening goes straight to the broker's pocket, as is the net swap charged for 1 lot long and one short. There are entire backend systems to allow a broker to calculate and only pass on the unmatched net positions of all clients to an acutal LP.
Of course, dishonest brokers can do anything from giving traders extra slippage all the way up to confiscating all the money in a trader's account for no reason other than a withdrawal attempt.
4evermaat
2nd Lieutenant
- Messages
- 2,709
Commission-free accounts or symbols is just a fancy way of saying the spread and/or swap is marked up appropriately.
There is no free lunch.
Also, some strategies might work better with commission in the spread vs charged separately.
NatureGirl
Corporal
- Messages
- 89
yeah but we have two different situations, commission + spread or just spread. Which one is better?
Scam Reporters
Sergeant Major
- Messages
- 650
If we talk about your average forex company, would these be different programs then price aggregators? Is this something MT4/5 already has embedded (if paid for)? Or you speak of entirely different programs?
Should such programs be of regulatory interest? I can already see many issues such as conflict of interest, best execution, fair, clear and not misleading advertising statements... A regulator should have both sufficient technical knowledge and technical capabilities to properly asses such issues (hardly the case in EU).
