If a broker advertises 0 pips, it’s probably too good to be true.
(PRWEB UK) 25 July 2013
* Brokers advertising “spreads from 0 pips” may create a false sense of security
- Hidden charges, fees and commissions push up the true cost of trading
- Survey shows rogue brokers charging 15 to 60 times more than others
- Customers could be $1,182 out of pocket in just 30 days
ForexBrokersAZ.com is warning Forex traders to compare spreads and commissions carefully between brokers before opening a Forex trading account. The promise of low or even 0 pip spreads across currency pairs can significantly understate the true cost of trading currencies online.
A survey of 20 leading Forex brokers by ForexBrokersAZ.com found that some charge 15 to 60 times more commissions than others for the very same service. A customer buying and selling 1 standard currency lot on a “0 pip” account with a rogue broker could effectively pay up to:
- $120 in commissions across minor currency pairs such as AUD/NZD, EUR/NZD or GBP/CAD;
- $30 in commissions across major currency pairs such as EUR/USD, GBP/USD or AUD/USD;
This compares to just $1.8 / lot with the best value broker in our panel across all currency pairs*. A customer trading just 10 lots a month would be $282 to $1,182 worse off as a result, depending on the combination of currency pairs.
So why do traders fall for it?
Comparing the real cost of trading currencies online is challenging because brokers have more than one source of income: spreads, commissions or a combination of both. Other charges may apply when positions are kept open overnight or an account becomes inactive.
Understanding Forex spreads
Most brokers make money through spreads: the difference between the price at which traders buy and sell currency. Spreads are expressed in pips and can be variable, fixed or even 0. Spreads often vary across currency pairs, with some brokers offering tight spreads on highly sought after Majors and less competitive pricing across other currency pairs.
Comparing Forex commissions
Some brokers also charge commissions, either in addition to or instead of spreads. In fact, most ECN brokers only charge commissions. Commissions are expressed in US$ and can be fixed or vary with a customer’s trading volumes, net deposits or account equity.
Matt Taylor, Director of ForexBrokersAZ.com, says: “If a broker advertises 0 pips, it’s probably too good to be true. However, comparing brokers is challenging because they can offer different trading conditions across a range of accounts.”
“At ForexBrokersAZ.com, we’ve created a search engine that compares 20 Forex brokers down to the account level. Compare spreads, commissions and promotions in one place to find the right broker for you.”
(*) Note to editors:
The $1.80 commission per lot is available from the best broker in the ForexBrokersAZ.com panel to traders with net deposits or equity at or above US$ 50,000. The commission would otherwise rise to $3.50 per lot for traders with net deposits or equity under US$ 50,000. This includes all currency trading commissions and excludes commissions associated with other asset classes, such as stocks or precious metals.
ForexBrokersAZ.com is a free and impartial comparison service for Forex traders. The service compare brokers down to the account level, helping traders find an account that matches their search criteria. In the last 6 months, over 1,000 traders have opened an account through ForexBrokersAZ.com.