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Spreads...

Discussion in 'General Forex Talk' started by ronan chai, Oct 18, 2010.

  1. ronan chai

    ronan chai Private

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    Hi, I'm new to forex, and i'm currently demo-ing on etoro and FXOpen. I've met this situation where in FXOpen it's stated that the fix spread is 2(it's written as "commission" in MT4 instead of "spread"??), however it's 6.4 for 1 standard lot. While in etoro it's 3 spread per unit, 3x100000(1 lot) which is 30 for 1 standard lot? Both is using the same leverage(1:200). Now can anyone explain this difference to me please?

    6.4 spread/lot and 30 spread/lot?? that's alot!!!
     
  2. Pharaoh

    Pharaoh Colonel

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    Usually, commission is separate from spread. If you open a position on a pair with a 2 pip spread, you start off at -2 pips (-$20 if trading a full lot on an xxxUSD pair).

    Many brokers don't charge commission and make their money on the spread. Those that do usually claim to be ECN and claim that the spread is the true market spread.
     
  3. ronan chai

    ronan chai Private

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    Thanks for you explanation Pharoah.

    That means MT4 do not show you what is your current leverage and you have to do your own math to know it?

    I have another question. In MT4, does the "Margin" means used margin? If it is, why is it that, when I opened a position with leverage(1:200), the Margin=698.20, sometimes 697.85, 698.30, etc? Why is it not the same for every positions?

    And I thought the used margin is supposed to be only 500 for one standard lot with leverage 1:200??? Or the broker is charging me more than what is supposed to be?
     
  4. Pharaoh

    Pharaoh Colonel

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    If you have some open positions, scroll down to the bottom. You should see something like this:

    Balance: Equity: Margin: Free Margin: Margin level: %

    If you are trading 200:1, you should be using about $500 for one lot, but this will vary for some pairs, since not all lots are exactly equivalent to $100,000. Also, check the broker's website carefully - they may have different margin requirements for some exotic cross pairs and for non-forex items (like metals). Margin requirements for hedged trades can also vary from broker to broker.

    In a demo account, open a trade on 1 lot of an xxxUSD pair. Close it, then open a trade on 1 lot of an USDxxx pair and you'll see the difference.
     
  5. ronan chai

    ronan chai Private

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    but I'm trading on EUR/USD, is that considered exotic pair? And i checked the broker's website(forex4you), and it's stated that the locked margin is 0%, what does that means??
     
  6. Jessica Wyeth

    Jessica Wyeth Recruit

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    Margin lock-ups "lock in" the prime broker's margin and collateral requirements for a specified period of time (between 30 to 120 days depending on the size and creditworthiness of the hedge fund client and the volatility and diversity of its trading strategy). The lock-up prevents the prime broker from altering pre-agreed margin requirements or margin lending financing rates, or demanding repayment of margin or securities loans or any other debit balance.
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