Loading...
No results

Why Trading Costs Matter So Much

Fusion Markets

post content image

Fusion Markets prides itself on its low-cost approach to trading, but have you ever wondered why access to low-cost execution is important and what part it might play in your long-term success as a trader?

 

You might not even link the two things together, and I can see why. After all, a few pips of spread, or dollars and cents of commission paid, is small potatoes when you are trading in tens of thousands of dollars worth of currencies and other instruments daily.

 

But not so fast because these costs make a difference in the long-term, and that is the timescale that Fusion wants to be your partner in the markets.

 

Let’s look at some numbers and imagine that you are a moderately active trader with a strategy that you deploy across five instruments daily. On average, you make 20 trades per day. Let’s call you Trader A. You have a friend who deals with another broker using a similar strategy, but they don’t offer Fusion Markets low commission rates. Let’s refer to them as Trader B.

 

You pay our low commission rate of USD 2.25 per trade whilst Trader B pays $5.00 per trade. You both trade 20 times a day, five days a week. That means that you, Trader A, pay $225 per week in commission while your friend, Trader B, pays $500 in commission per week. That’s $275 more than what you pay.

 

Now let’s scale that up...

 

Over a month, that’s a difference of around $1,100 commission, and over the course of the year, Trader B pays an additional $14,300 dollars more in commission than you for the same or similar trades.

 

That means that Trader B will pay away an astonishing $71,500 of additional commission over five years of this type of active trading.

 

Not only does Trader B pay those additional costs, he or she also “pays” the opportunity costs of not having that money available to them. Money that could have been saved or invested or that could have helped pay off the mortgage, the car loan or a nest egg for your kids that much quicker.


All that before we even consider the possibility of compound growth on that money over time.

 

Tighter spreads matter too.

 

Now not only do lower commissions benefit your trading and finances so do tighter spreads. After all, some brokers charge astronomical amounts in spreads.  

 

Spreads are the difference between the bid and ask prices in the market, the prices at which you can buy or sell a financial instrument like a currency pair or equity index.

 

Each time we buy or sell an instrument at the market price, we are said to be” crossing the spread” or if you prefer incurring the cost of spread in our trade.

 

The spread is seen as a cost because we have to make it back before our trade moves into profit.

 

Think of it like this: Instrument A is priced at 100-101. We can sell at 100 and buy at 101.

If we buy a unit of instrument A at 101, we incur an immediate running loss. That’s because our trade is valued at the price that we can sell the unit of instrument A for, and in this case, that’s 100.

 

In making the trade, we have incurred the spread as a cost. To make those costs back, we need to see the price of instrument A move up to 101-102 or higher. If it does that, it means that we now can sell our unit of instrument A at the price we paid for it. That is, we are now at breakeven on the trade.

 

And if the price of instrument A moves to 102-103, then we have a running profit on our trade because the bid price of Instrument A is now above our trade entry-level.

 

Spreads in FX trading may appear small but don’t forget that trade sizes are typically larger here.  Remember that a standard FX lot is US$100,000 of notional value.

 

What’s more, FX trading is leveraged, meaning that clients can gear up their account and at the maximum available leverage of 500:1 (30:1 if you're a retail client with ASIC), that means that a deposit of just US$ 2000 could control 10 FX lots or US$ 1,000,000 worth of a currency pair.

 

Even a small value like the spread in EURUSD grows pretty quickly when you multiply it by another 6 or 7 figure number. So, the difference between a 0.1-0.2 pip spread, that you typically find at Fusion Markets, in this most active of currency pairs, and a 1-2 pip price that you might well find elsewhere, quickly becomes material (in your head, you can do the math - 10-20x the figure is a LOT).  Our Historical and Live Spreads Tool is designed to allow you to see how spreads have changed historically, discover our average, minimum and maximum spreads and, consequently, make better informed trading decisions. 

 

Quite simply, the narrower or tighter that the spread you pay is, then the more chance you have of your trade moving into profit and doing so more quickly. Which, in turn, means more of your trades are potentially viable. Of course, you still have to do the leg work and get the direction of your trade right, but tighter spreads also mean that if you are wrong, and you cut or close the position. Then you are doing so at a more advantageous price, which can help keep your trading losses to a minimum.

 

Think of trading like an Olympic hurdle race. With a low-cost broker, you have a tiny hurdle to jump over in the form of lower costs. Your friend at Broker B has a giant hurdle he has to jump over every time he enters a trade. Who has the better chance of success here? Do you want to jump over a 1 ft hurdle or a 6 ft hurdle?

 

Successful trading is not a get rich quick scheme. It’s about finding and honing a style or system of trading that works for you and applying that to the markets over time. Successful traders often talk about slanting the odds of success in their favour, and they try to do this not just for the trade that’s in front of them now but for all of their trades during the months and years they are active in markets. Having a trading cost base that works in your favour can play a key part in this. It means the margin for error can be 10x lower than what your friend pays at Broker B.


So, isn't it time you stopped paying too much to trade?


We’ll never share your email with third-parties. Opt-out anytime.

Relevant articles

Trading and Brokerage
post image main
Building Your Forex Support Network

Read Time: 12 minutes


In the fast-paced world of forex trading, success often hinges on more than just market knowledge and technical skills. A crucial yet often overlooked aspect is the power of a strong support network. 

This network can provide invaluable insights, emotional support, and continuous learning opportunities that can significantly enhance your trading journey. In this article, we’ll discuss ideas on how you can build your own support network.



Table of Contents:



The Power of Community in Forex Trading


Forex trading can be a solitary endeavour, with traders spending hours analysing charts and executing trades. However, connecting with fellow traders can transform this experience into a collaborative and enriching one. A robust forex support network offers numerous benefits, including shared knowledge, emotional support, and access to diverse perspectives.


undefined

Learning Resources: The Foundation of Your Forex Education


Education forms the cornerstone of successful forex trading. As a trader, it's crucial to continually expand your knowledge and stay updated with market trends. Several platforms offer comprehensive educational resources for traders at all levels.



BabyPips: Your Forex University


BabyPips is renowned for its "School of Pipsology," a free, comprehensive forex trading course. It covers everything from basic terminology to advanced trading strategies, making it an excellent starting point for beginners and a valuable refresher for experienced traders.


Forex Factory: Your Market News Hub


Forex Factory is a go-to resource for many traders seeking up-to-date market news, economic calendars, and trading forums. Its user-friendly interface and real-time updates make it an indispensable tool for staying informed about market-moving events.


TradingView: Your Technical Analysis Companion


TradingView offers advanced charting tools and a platform for sharing trade ideas. With over 50 million users, it's not just a technical analysis tool but also a thriving community where traders can learn from each other's chart analyses and trading strategies.


undefined

The Benefits of Joining Trading Communities


Becoming part of a trading community can significantly accelerate your learning curve and provide ongoing support throughout your trading journey.



Guidance from Experienced Traders


One of the most valuable aspects of trading communities is access to experienced traders. These seasoned traders can offer insights into market dynamics, share proven strategies, and provide mentorship. Their guidance can help you avoid common pitfalls and develop a more nuanced understanding of the forex market.



Real-Time Market Insights


Trading communities often feature live discussions about current market trends and potential trading opportunities. This real-time information can be invaluable in making informed trading decisions. Members often share their analyses of market conditions, providing diverse perspectives that can enhance your own market understanding.



Collaborative Learning Through Trade Ideas and Chart Analysis


Many trading communities encourage members to share their trade ideas and chart analyses. This collaborative approach to learning allows you to see how other traders interpret market data and make decisions. By examining different approaches, you can refine your own trading strategy and discover new techniques.



Emotional Support and Motivation


Trading can be an emotional rollercoaster, with highs of successful trades and lows of losses. A supportive community can provide the emotional backing needed during challenging times. Sharing experiences with fellow traders who understand the unique pressures of forex trading can help maintain motivation and resilience.



Active Participation: The Key to Maximising Community Benefits


While joining a trading community is a great first step, the real value comes from active participation. Engage in discussions, ask questions, and share your own insights. The more you contribute, the more you're likely to gain from the community.


Building Your Personal Forex Support Network


Beyond online communities, consider building a personal support network. This could include:


  • Family and Friends: Their encouragement and understanding, especially during your dedicated trading and learning hours, can create a favourable environment for your trading journey.
  • Trading Mentor: A mentor can offer tailored advice based on your trading style and goals, helping you navigate the complexities of trading the forex market.
  • Fellow Traders: Connecting with other traders, whether online or in-person, can provide peer support and opportunities for knowledge exchange.

undefined

Leveraging Online Platforms for Community Building


Several online platforms facilitate community building among forex traders:



Forex Forums

Platforms such as Forex Factory, BabyPips, and MyFXbook host active forums where traders discuss various topics, from basic concepts to advanced strategies. These forums are excellent places to ask questions, share experiences, and learn from diverse perspectives.


Social Trading Platforms

Platforms like eToro and ZuluTrade allow you to follow and copy trades of successful traders. This can be an excellent way to learn from experienced traders while potentially benefiting from their expertise.


Trading-Focused Social Media

Many traders use Twitter, LinkedIn, and specialised platforms like TradingView to share insights and connect with other traders. Following reputable traders and analysts on these platforms can provide a steady stream of valuable information and opportunities for engagement.




The Role of Brokers in Your Support Network


Your forex broker can also be a valuable part of your support network. Many brokers offer educational resources, webinars, and customer support to help you navigate the trading platform and understand market dynamics. Choose a broker that aligns with your needs and offers robust support services.




Continuous Learning: The Lifeline of Forex Trading


The forex market is dynamic, with conditions constantly evolving. Your support network should facilitate continuous learning to help you stay ahead of market trends. Look for communities and resources that regularly update their content and provide insights into emerging market patterns.




Risk Management: A Community Effort


While individual traders are ultimately responsible for their own risk management, a supportive community can provide valuable insights into effective risk management strategies. Discussions about position sizing, stop-loss placement, and overall risk exposure can help you refine your approach to risk.




Navigating the Challenges of Online Communities


While online communities offer numerous benefits, it's important to approach them with a critical mind. Not all advice is created equal, and it's crucial to verify information from multiple sources. Be wary of individuals promising guaranteed returns or pushing specific trades. A healthy scepticism combined with thorough research will serve you well in navigating online forex communities.




The Global Nature of Forex Communities


One of the unique aspects of forex trading is its global nature. Your support network can include traders from around the world, providing insights into different market sessions and regional economic factors. This global perspective can enhance your understanding of currency pair movements and international economic dynamics.




Technology and Forex Communities


Advancements in technology have revolutionised how forex communities interact. From mobile apps that allow real-time chat with fellow traders to AI-powered tools that aggregate community sentiment, technology is making it easier than ever to stay connected with your forex support network. Embrace these technological tools to enhance your community experience and trading outcomes.



The Psychological Benefits of a Support Network


Trading can be psychologically demanding, with the potential for stress and emotional decision-making. A strong support network can provide a psychological buffer, offering encouragement during tough times and helping you maintain a balanced perspective. This emotional support can be crucial in developing the mental resilience necessary for long-term trading success.




Conclusion: Your Path to Forex Success


Building a robust forex support network is not just beneficial; it's essential for long-term success in trading forex. From educational resources to emotional backing, the right connections can significantly enhance your trading experience.


By actively participating in trading communities, engaging with mentors, and utilizing the plethora of online resources available, you can create a comprehensive support network that fosters your growth as a trader.


Remember, the journey of forex trading is not just about numbers; it’s about the community and connections that can help you navigate the complexities of the market. Start building your support network today and watch your trading journey flourish!


02/10/2024
Trading and Brokerage
post image main
Index CFD Dividends | Week 14/10/24

Read time: 3 minutes.


Please see the table below for any upcoming dividend adjustments on indices for the week starting October 14th, 2024.


FM Dividends 14.10.24

* Please note these figures are quoted in the index point amount

 

What is a dividend?


Dividends are a portion of company earnings given to shareholders. As indices are often composed of individual shares, an index dividend pays out based on individual shares proportional to the index’s weighting.


Trading on a CFD Index does not create any ownership of the underlying stocks, or an entitlement to receive the actual dividends from these companies.

 

What is an ex-dividend date?


An ex-dividend date is the cut-off date a share must be owned in order to receive a dividend. If an investor buys a share after the ex-dividend date, then they will not be entitled to earn or pay the next round of dividends. This is usually one business day before the dividend.

 

Do dividends affect my position?


Share prices should theoretically fall by the amount of the dividend. If the company has paid the dividend with cash, then there is less cash on the balance sheet, so in theory, the company should be valued lower (by the amount of the dividend).


Due to the corresponding price movement of the stock index when the ex-dividend date is reached, Fusion must provide a 'dividend' adjustment to ensure that no trader is positively or negatively impacted by the ex-dividend event.

 

How will the dividend appear on my account?


The dividend will appear as a cash adjustment on your account. If your base currency is different from the currency the dividend is paid out in, then it will be converted at the live FX rate to your base currency.

 

Why was I charged a dividend?


Depending on your position, given you are holding your position before the ex-dividend date, you will either be paid or charged the amount based on the dividend. Traders shorting an index will pay the dividend, whereas traders who are long the index will be paid the dividend.

 

Why didn’t I receive my dividend?


You may not have received a dividend for a number of reasons:


- You entered your position after the ex-dividend date

- You are trading an index without dividend payments

- You are short an index


If you believe the reasons above do not apply to your position, please reach out to our support team at [email protected] and we’ll investigate further for you.




01/10/2024
Ready to Start Trading?
Get started live or get a free demo