What is the best type of transaction cost?？How to Get the Best Transaction Cost from Forex Broker？Please find the answer below。

Every broker needs income to continue to operate, even by offering many bonuses, free commissions or extremely low spreads, they are always able to earn income from traders。

So as a trader, you should not be easily swallowed up by those shiny quotes without considering the reality behind them。In every attractive product, you may get costs and risks from the broker。

So you need to choose a broker based on transaction costs.。

In general, there are 4 steps:

1. Understanding Transaction Cost Types
   Select Spread
   Consider commission
   Additional costs

In the following article, we will discuss these issues in detail。

1.Understanding Transaction Cost Types

Essentially, Forex brokers charge three types of commissions and transaction costs are divided into three categories:

1. fixed point difference
2. Floating spread / variable spread
3. Commission

At first glance, a fixed spread may sound like the right choice, because then you will know the exact cost expected and will not have to worry about price changes in the foreign exchange market。If the broker uses a fixed spread, the spread may remain within a certain point or range even if the price changes due to market fluctuations。

Conversely, floating or variable spreads can change in response to price movements。Therefore, you can expect the spread to be below or above 2 points。

Third, the broker may charge a commission to compensate for the original spread or zero spread, which may be two tenths of a point, and then pass the fee on to the liquidity provider。With this system, you can get very small spreads, usually only for large-scale investors。

2.Choose spread: fixed or floating？

When it comes to choosing the right type of spread, each trader is likely to have a different answer。

Brokers with floating spreads often have good links with many liquidity providers and can offer their clients more competitive prices。Even after widening spreads for greater profits, such brokers can still offer more competitive spreads than brokers with more limited limited partners。

The disadvantage is that because floating spreads are entirely dependent on market volatility, they may be beneficial or harmful to your trading.。If volatility is high, you may have to pay higher fees than expected。Therefore, if you choose variable spreads, you must pay extra attention to the trading time。

However, if you are a trader who prioritizes accuracy, a fixed spread may be the best choice because the cost can be calculated in advance and almost no change is expected。Slippage, a situation where orders are executed at different prices, is a situation you absolutely want to avoid。

Finally, there are two main rules:

• If you prioritize stability, then a fixed spread may be more suitable for you than a floating spread。
  If your strategy is best for low spread conditions, then choosing a floating spread may be a better solution。

3.Consider commission

Assuming a floating spread is chosen and the broker comes with a commission, you might reconsider and think "Is it worth it?"？"

In this case, it is best to clarify what the commission is and make sure it is not too much for you。Brokers such as IC Markets and ThinkMarkets typically charge both parties 3.$5 commission。So if you don't mind paying an extra $7 for each standard lot you trade, choosing a floating spread won't be a problem。

In addition, it is worth noting that some brokers may even offer additional bonuses or services in exchange for commissions to attract more traders.。

For example, a broker may charge a commission of two-tenths of a point, or about 2 per 100,000 trading units..50-3 dollars, but unlimited use of advanced trading platforms and some other benefits。

So in this case, it may be worthwhile to pay a small commission, just make sure that the service provided is useful and worth the money。

4.Be aware of other forex broker fees

In addition to these three types of commissions, there are hidden transaction costs that traders often overlook。

In some cases, the spread shown on the broker's website is not completely accurate because it does not show the real trade execution。The broker may only show the best price for about five lots, and the fact is that the spreads for the next lots are different。

Some brokers may also charge funds fees that you must pay when you deposit funds into your account, often depending on the payment method you use。In addition to this, you should also be aware of brokers that charge negative swap rates on overnight positions。

Finally, the government may collect some taxes。If you live in a country that treats Forex trading profits as taxable income, you need to pay attention to the accumulation of profits before the end of the year。

Conclusion

There are 3 types of transaction costs for forex brokers: fixed spreads, floating spreads and commissions。To minimize unexpected losses, you should first understand your trading needs before choosing these types of transaction costs。

Keep in mind that brokers are commercial companies that need to earn income to operate, so even if their transaction costs are very low or even free, you should not immediately believe。Brokers may actually charge hidden fees that you only realize after trading with them for a while。More importantly, make sure the broker's services match your trading needs。

Finally, while this is not the only factor in deciding to choose a broker, transaction costs should not be underestimated, as it can become a burden and affect the entire trading experience, especially if you intend to make small transactions。