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What is Forex Trading, and What are Trading Account Fees
Lately, many people have started to think of ways to liquidate their savings and earn additional profits from the liquidation. Some people have started to invest in businesses, others have bought bonds or stocks, and some others have started to trade Forex.
Forex trading is when people make profits from the fluctuations of different foreign currencies. In other words, as exchange rates are volatile and fluctuate constantly, people have found that exchanging certain pairs when they are profitable is a good way of liquidating their savings.
For instance, a Forex trader can purchase a pair of foreign currencies - such as U.S. Dollars (USD) and Australian Dollars (AUD) - at a certain price. However, when the exchange rates change, and the trader analyzes that they will make a profit when they trade the pair at a price higher than they had bought it, they will trade and earn the profits. Nevertheless, a pair can only be traded with the same pair; thus, having numerous foreign currency pair options available will be beneficial for traders. For this, it is important to check what currency accounts Forex Brokers offer - check out all FX brokers that offer AUD accounts.
On the other hand, to trade with Forex, traders are required to open an account on a Forex Brokers’ platform. To access the platform's numerous analytical and other features, traders must pay a fee to the broker to make better-informed decisions using the tools and features.
Who is Responsible for the Assigning Prices
To trade with Forex, people are required to open accounts on Forex Brokers’ platforms. However, there are numerous Forex Brokers available in the market, and choosing the best one as a trader can be a difficult process.
Each individual broker is responsible for assigning the fees and prices for different things on their platforms. Nevertheless, there needs to be a certain limit for the assigned fees because if there aren’t any, brokers will start to take advantage and assign high fees.
So, as the Forex Trading industry is large, a regulatory body is needed that will set forth numerous laws and regulations for the Forex Brokers to follow. The Forex regulatory bodies aim to ensure traders have a fair and safe foreign exchange trading experience, alongside providing limits to the fees assigned by Brokers.
However, it is important to mention that each regulator will have different limits for fees - these differences can be because of numerous reasons, such as location, number of brokers, etc.
When choosing a Forex Broker, one of the main things traders need to do is compare each broker's offered prices. Here are the most important things to look for and compare before opening an account:
1- Spread
Spread in Forex trading is the difference between what a trader is asking for the foreign currency pair (bid price) and the actual price offered by the Forex Broker. Spreads are considered one of the main profit generators for Forex Brokers; thus, comparing the spreads for a currency pair for different brokers will give traders a better understanding of how much they will profit with each broker.
2- Leverage
The leverage is used in Forex to give traders better positions when bidding for currency pairs. When using a Forex Broker, traders will likely see a number written in the following form - 100:1.
This means that for every $1 a trader puts forth from their savings, they can control $100 in the market.
3- Minimum Deposits
Minimum Deposits in Forex are the amount traders are required to have in their Forex trading accounts. In other words, a minimum deposit is required to allow people to open Forex accounts. However, the prices differ based on Forex Brokers and the type of account a trader is willing to create.
4- Withdrawal Rates
The profits that traders make from their foreign currency exchanges are kept in their Forex accounts, as in, the profits are not directly sent to the traders' bank accounts.
So, brokers demand fees to withdraw the profits to a bank account. Thus, ensure to compare the withdrawal fees to understand how much profit you will lose when withdrawing it to your bank account.
5- Commission Rates
Lastly, the most important rate that a trader needs to compare is the commission rate. Commission rates are what Forex Brokers take away from each foreign currency pair transaction. So, ensure to create an account with low commission rates to reduce the losses from your transaction.
Conclusion
To conclude, numerous Forex Brokers are available in the market, and choosing a broker can be tricky for traders. Thus, to make the process easier, it is important to compare the fees and different rates offered by Forex Brokers and, afterward, make the right decision based on your preferences.
Disclaimer
The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.