In order to do Forex trading, it is fundamental to open an account with a Forex company that will act as an intermediary company.
Because Forex companies also have to manage the company with money collected from investors, they earn income from spreads and commissions.
Some overseas Forex companies have investment opportunities with 0 spreads and fees. As a securities company, there is no profit of the basic fee, so I am wondering how the company makes profit. Having no spread or fee does not mean it’s a malicious securities company. There is a neat business model there. Comparison of spreads in selecting overseas Forex security companies is an important point, but so is understanding the backside of low spreads and trade.
Spread 0 becomes an encouragement
Although it can be said that Forex can be done with 0 Spread, but not all currency pairs are 0.
Spreads are originally low, like pairs of dollars and yen, only currency pairs with high stability are 0 spread and other currency pairs usually have spreads. It is the cost aspect that consumers place emphasis on choosing a company among a number of Forex companies.
There are many places with low spread, but there is nothing that attracts consumers' interests as much as 0. Since there are many currency pairs that can be traded, they encourage the number of investors opening accounts by 0 spreads and letting them trade for other currencies with spreads will lead to profits.
When you become a professional trader you trade with the position of several currency pairs, but Forex beginners often deal with one position rather than holding multiple positions. The overseas Forex securities company that can do with spread 0 has merit that novice opens an account and invests and holds the position, and but holding multiple positions will diminish the benefits of 0 Spread.
Also, in the case of fluctuating spread, it means the minimum value is 0, so it is important to note that it is not always possible to trade on 0 spread. By setting spread to 0 for a fixed time, the securities company can make existing facts. Where there is a fixed spread, the change is small, so the benefits of trading by spread 0 will be big even if the spread using variable spread is adopted, in fact, there are cases where the range of the spread is big even though the spread is 0.
They are collecting fees from swap points
In Forex, there are not only profits associated with currency fluctuations but also revenues that can be earned by swap points.
This is caused by different interest rates overseas, depending on the currency pair, the selling position and the buying position will be different depending on whether it becomes profit or loss. A securities company can make a profit by collecting a certain fee from a swap point that stably occurs even if the spread is 0.
If you are an investor who is considering overseas Forex centered on day trade, there is no problem, but there is not much merit to those who make investment considering profit by swap point mainly because of less frequent trade to use a company with 0 spread. Forex beginners tend to focus mainly on day trading. If the swap of the holding position is a minus vector, it is possible that the fee deducted from the swap point may further increase, so be careful.
The swap points of each securities company can be learned from the website. If you are considering investing with a long-term position in mind, check in advance how swap points of the currency pair you are trading with are different from other companies. Even in the state of holding a losing position, it may turn to positive in the long run depending on the income of the swap point, so swap points may become more important than 0 spread depending on the contents of the transaction.
They can get profit on slippage
If you use a securities company with spread and commission of 0, you need to pay attention to slippage.
This is a phenomenon caused by lag in the actual market price and the timing of order. In some Forex companies that reduce the cost by reducing the commission to zero make it easy to generate slippage and even if you order at a contract price that would normally earn revenue, there are also places where they earn profits by making settlement at the timing when loss occurs.
Slippage itself can happen at Forex companies that take spreads and fees, but what is important is the frequency of occurrence. If the market is not active and the slippage frequently occurs at the timing when the fluctuation of the market price is small, it is possible that to slip intentionally. There is a limit order as a method to prevent slippage loss. Since it is possible to preset it to be traded at the price they specify if it is a limit order, it is possible to prevent it to slip unreasonably.
They earn revenue by account maintenance fee and loss cut fee
If you are using a securities company that can do Forex trading with 0 spreads and fees, you need to check in advance whether there are other part that cost anything. There are many places where many securities companies manage account maintenance free of charge, but if there is no trading for a certain period of time there is a charge for a fee.
There are cases where a fee may also be raised even if the market moves and loss cuts occur. If spreads and trading fees are required, there are not many other fees charged separately. However, there are so much burden as to where the fee is suppressed, so it will be necessary to set up a fee etc. separately. For those who do Forex for the first time, it is better to be as low as possible trading fee. You need to be careful about sweet talks by the fact that you are a beginner.