How much does it cost to trade?

How much does it cost to trade

Entering the Forex market can cost very little. The capital required is the amount required by the brokerage for deposit in a margin account. Some brokers allow a minimum account balance (for the margin account) as low as $1 . With leverage the amount of foreign currencies controlled by that minimum account balance can be large. In practical terms, trading with a minimum amount in the margin account can be risky. A small unfavorable change in currency rates can quickly deplete a margin account with a minimum balance.

In practice, the cost of each trade (before any profit or loss), is found in the spread. Since a Forex pair is purchased at the Ask price, and sold at the Bid price, there is a cost of trading that pair, which is the amount of the spread, multiplied by the amount of currency being traded. Normally, there is no commission charged for Forex trading. The cost is limited to the spread. A common spread for major currencies might be 0 pips to 3 pips . With that spread, there is a cost $30.00 for entering and exiting a trade of currencies valued at $100,000.