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Basic Forex question regarding cost.
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Basic Forex question regarding cost.

  #1 (permalink)
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Basic Forex question regarding cost.

I am considering doing some day-trading at forex.com. Which I think is the spot market. I am doing okay in equities, but I just want to take small amount of money and look at other things.

So, How do I figure out how much a currency has to move for me to actually make money? That seems like a dumb question. But the bid/offer seems to jump around quite a bit. And it is not clear to me if the commission is coming out of that or is a separate charge. So if trading the Euro, GBP, Yen, and Swiss frank, what kind of a move do you need to see in order to cover costs and at least break even. Thanks

fyi. I have no intention on jumping into this soon. Just trying to learn how it works.

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  #3 (permalink)
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mcteague View Post
I am considering doing some day-trading at forex.com. Which I think is the spot market. I am doing okay in equities, but I just want to take small amount of money and look at other things.

So, How do I figure out how much a currency has to move for me to actually make money? That seems like a dumb question. But the bid/offer seems to jump around quite a bit. And it is not clear to me if the commission is coming out of that or is a separate charge. So if trading the Euro, GBP, Yen, and Swiss frank, what kind of a move do you need to see in order to cover costs and at least break even. Thanks

fyi. I have no intention on jumping into this soon. Just trying to learn how it works.

The value per pip changes depending on the currency pair you are trading. EURUSD is always $10 per pip for a full lot. Most spot forex brokers will let you go as low as 0.01 lots.

Here is a link to a site that will let you calculate the value per pip: https://www.xm.com/forex-calculators/pip-value For many pairs the value per pip will vary with price so you will need to know the current price for the calculator to work properly.

Not sure how Forex.com is set up but many spot forex brokers don't charge a commission (Oanda for example). They make all of their money on the spread. If Forex.com charges a commission you will see much lower spreads. Usually with a non-commission broker EURUSD will have a spread of around 1.2-1.5 pips. With commission you can see spreads down in the 0.1-0.3 range. If they charge commission you will need to overcome the spread and the cost of the commissions to get at least to break even. No commission then you just need to overcome the spread. Tricky part is as you have seen, the spread varies. During news events that effect that currency you will really see the spreads widen.

A good site to learn about spot forex trading: http://www.babypips.com It's free and has tons of good info.

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