How to get the best brokerage fees
Reading time: 25 minutes
The impact of brokerage fees on a trader's profitability is often overlooked. There are a variety of trading fees to take into consideration such as spreads and swaps - among others - which differ from broker to broker. Even with the same broker, online stock trading fees may differ to Forex trading fees which may differ to bitcoin trading fees. So how do you find the best brokerage fees for your own needs?
This article will explain all you need to know about the different types of brokerage fees you need to be aware of, how broker fees can differ between different asset classes, the difference between receiving the cheapest trading fees versus typical trading fees, how to perform an online trading fees comparison and how you could potentially start trading today with some of the lowest trading fees and brokerage commissions available in the marketplace.
What are brokerage fees?
When buying or selling on a particular financial market there are costs involved in doing so. These costs are known as broker fees or brokerage commission. Essentially, these are the costs your broker will charge you to use their services as a middleman and put your trades through to other buyers and sellers in the market.
The amount you pay in brokerage fees will vary among brokers, as well as between different asset classes. Historically, brokerage fees were quite high due to inferior technology and the difficulty in accessing markets. However, the internet and new technology have revolutionised the industry, making the brokerage field highly competitive and giving individuals, like you, some of the lowest trading fees in history.
This then gave birth to discount brokerage firms. A discount brokerage is a stock brooking firm that allows you to place your orders online, thereby offering you much cheaper fees to trade. As you pay a broker fee or commission on the buying and selling of a financial instrument, using the right broker is essential when investing in low-cost stocks.
Unfortunately, not all brokers are equal and some have much higher fees than others as you'll see in the next section!
The different types of broker fees explained
Below is a list of some of the typical trading fees to be aware of. Not all brokers will charge a fee for a particular service or product and some will be higher or lower than others. There may be some other additional or hidden fees that are unique to a broker so it is worthwhile checking the broker's terms and conditions to be sure.
Brokerage Fee #1: Trading Spreads
The most common type of brokerage fee is the trading spread of an asset class. The spread is the difference in value between the buy price (ask price) and the sell price (bid price) of an asset. Trading spreads are also known as bid-ask spreads and they vary greatly between brokers and asset classes.
You can view the spreads of different trading instruments through your broker's trading platform. For example, in the Admiral Markets MetaTrader trading platform you can view the bid and ask prices of different asset classes through the Market Watch window (Ctrl+M):
So how do you know if your broker has the cheapest trading fees or the lowest trading fees in the market? The only way to find out is to do an online trading fees comparison test.
Brokerage Fees Spreads Comparison
On 16 July 2019 an online trading fees comparison test was conducted and offered the following online trading fees comparison:
As you can see the trading spreads vary from broker to broker with some higher and lower than others. In some cases, Dow Jones CFD ( Contract for Difference) traders would be paying 200% more in spread cost from the lowest spread provider to the highest. That is a significant impact on anyone's trading profit!
In fact, with Admiral Markets UK Ltd you can test drive the spreads for different asset classes by using a FREE demo trading account. You can see for yourself in real-time - and with zero risk - the trading spreads for Forex and CFDs on Stocks, Commodities, Indices, Cryptocurrencies and more!
Simply click on the banner below to open your FREE demo trading account today:
Brokerage Fee #2: Trading Commission Transaction Fees
On top of the spread, there may be an additional brokerage commission or trading commission due on each transaction undertaken. For example, many brokers offer Forex ECN (Electronic Communication Network) and STP (Straight Through Processing) trading accounts where individuals can trade directly with the broker's liquidity provider (usually top tier banks). This allows users to get the lowest trading spreads possible.
This will usually come with additional fees per transaction undertaken. For example, with the Zero.MT4 account which offers STP trading capabilities, the commission per 1 lot traded can be between $1.8 and $3. However, the benefit of this is that Zero.MT4 account spreads start from 0 pips. If you're interested in opening an account simply click here.
For a traditional type of Forex account, such as an Trade.MT4 account, Forex trading is actually commission-free, with only spreads and swaps payable. CFDs on shares and ETFs, meanwhile, are charged a commission of a percentage of the total value of shares being traded or by per share being traded. More details can be found in the Online Stock Trading Fees section further down the article.
Brokerage Fee #3: Swap Trading Fees
Swap trading fees are applicable to traders who hold positions overnight, or roll-over a buy or sell position from one trading day to the next. The swap trading fee is an interest fee that is either debited or credited to you at the end of each trading day. Swap rates can be found on the Admiral Markets Contract Specification page under the market symbol you are trading.
Swap trading fees are calculated differently depending on which market is being traded and are discussed in more detail in the Forex Trading Fees and Online Stock Trading Fees sections further down this article.
Other Brokerage Fees
While the broker fee is the main cost of trading financial markets, there may be some additional expenses to consider, depending on your broker. These include:
Real-time data feeds
To access the real-time data of a financial markets, the corresponding exchange charges a fee for it, which brokers may pass this on to their users. For example, obtaining real-time prices of shares with certain banks will have an associated cost per stock exchange that the user requires access to.
So, to access the live prices of stocks listed on the New York Stock Exchange will cost $7 per month, the Nasdaq Stock Exchange another $7 per month, the London Stock Exchange £7 per month, the Deutsche Bőrse Exchange €7 per month and so on. The monthly fees can add up quite quickly!
Fortunately, all accounts with Admiral Markets offer real-time data broker fees meaning you can view live, up-to-date prices of all global markets offered.
Account maintenance fees
There are some brokers and investment houses that will charge a fee for possessing an account with them. After all, the maintenance of their platform, customer service support, regulations, and staff members will all incur expenses. The question is whether or not they will pass it on to you.
For example, some institutions charge £1.80 per month as a fixed account admin fee, whereas some banks charge a minimum of £4 per month if you have cash in their account, or if you have an open investment. Again, these monthly fees can start to add up - even when you are not using the account. If you are considering trading with Admiral Markets you might be pleased to know that there are €0 account maintenance fees, and €0 custody fees.
Analysing the chart of a stock price can help with identifying patterns and signals for time stock purchases. The maintenance and stability of a state-of-the-art trading platform can be expensive, and some brokers will pass on the cost to the user. Fortunately, Invest.MT5 account holders receive all of the above completely free.
Many brokers will charge for these additional features, which can eat into your investment returns and turn low cost stocks into expensive ones. After opening an account you can access some of the lowest costs of investing with a suite of complementary features and support for supercharging your investing process.
Inactivity Trading Fees
Nowadays, many brokers will charge a monthly inactivity fee. For Admiral Markets' clients who have not made any transactions for the previous 24 months and have a positive balance on their trading account, this will amount to 10 EUR per month.
Currency Conversion Broker Fees
Brokers will often charge a currency conversion fee if you are trading instruments that are priced in a currency different from your base account currency. For Admiral Markets' clients, internal transfers between separate trading accounts with different base currencies are subject to a fee of 1% of the total amount.
Withdrawal Brokerage Fees
While many brokers offer commission-free deposits, most will charge some type of withdrawal fee. This will vary based on the withdrawal method and amount. Clients of Admiral Markets receive two free withdrawal requests every month via bank transfer.
Now you know more about brokerage fees, let's have a look at a few examples on how to calculate trading fees for specific markets.
Forex Brokerage Fees
Forex trading fees will vary depending on the type of account offered by your broker. For example, the Trade.MT4 account allows you to trade Forex commission-free with low spreads. The Zero.MT4 account allows you to trade Forex directly with the broker's liquidity providers (usually top tier banks) to receive even lower spreads (from 0 pips) but with a commission per lot traded per transaction. There are also swap trading fees for both types of accounts.
If you'd like to learn more about Admiral Markets' different trading accounts, you can do so in this article on finding the best Forex trading account.
In the next section, you will see how easy it is to view trading spreads and swap rates directly from your trading platform. If you would like to follow these steps in real-time then why not download the Admiral Markets MetaTrader trading platform for FREE?
By downloading the world's number one multi-asset class trading platform, you will also gain access to free real-time market data and analysis, insight from professional trading experts and much more, completely free!
Click on the banner below to get started:
How do you calculate Forex trading spreads?
Forex trading spreads can be calculated by opening up the Admiral Markets MetaTrader platform and pressing F9 on the symbol you want to trade. This will then open up a trading ticket which will have the bid price and ask price.
An example of a trading ticket on MetaTrader 5.
Trading spreads can be calculated by subtracting the ask price from the bid price. In the trading ticket above for AUD.CAD this would be 0.00024 (0.90956 - 0.90932). As a one pip movement in AUD.CAD is 0.0001, the spread above is 2.4 pips. If the market moves 2.4 pips in your chosen direction then you are at a 'break-even' level as you have now covered the spread value. Anything beyond 2.4 pips is potential profit, as long as it is in your trade direction.
How do you calculate Forex swap trading fees?
Forex swap trading fees can be found directly in the Admiral Markets MetaTrader platform. In the Market Watch section (Ctrl+M), users simply need to right-click on the instrument they are interested in and then select Specification which will open up a Description window with the Swap Long and Swap Short values.
An example showing the Description box for a specific symbol in MetaTrader 5.
A Forex swap is the interest rate differential between the two currencies you are trading. When trading Forex on margin, you receive interest on your long positions and pay interest on your short positions. The difference in these values is known as the carry.
A positive carry means you receive more in interest than you need to pay in interest, which will be credited to your trading account. A negative carry means you pay more interest than you receive which will be debited from your trading account. However, if you open and close a trade on the same day, there is no carry to pay.
For example, in the contract specification screenshot of EUR.AUD below, the line SWAP Value (Short) reads 0.2 pips, meaning traders would be credited 0.2 pips worth of their contract size per pip for holding a trade open overnight. Traders who hold a long trade open overnight will have to pay 1.425 pips to do so which would be debited from the trading account.
Source: Admiral Markets EUR.AUD Contract Specifications, 19 September 2019
How do you calculate transnational Forex trading fees?
While Forex trading on the Trade.MT4 account is free of additional transactional fees, the Zero.MT4 account is commission-based per transaction, which is common across most brokers who offer Forex ECN trading direct with the broker's liquidity providers. While the trading fees vary from broker to broker, they are mostly calculated in the same way. Let's look at an example using the Zero.MT4 account fees.
Source: Admiral Markets commission calculations, 19 September 2019
To work out the commission for a round turn trade (this includes the opening and closing of a trade, where both are charged at the opening of a trade), the following formula is used:
Commission (in the account currency) = Contract size * Commission rate (in the account currency) * 2
So, if a trader bought 1 lot of AUD.CAD in a EUR denominated account the commission on an Zero.MT4 account would be 5.2 EUR (1 Lot * 2.6 EUR *2).
If the trader then decided to buy 2 lots of AUD.CAD in a USD denominated account the commission would be 12 USD (2 * 3.0 USD * 2).
Online Brokerage Fees for Stocks & Shares
Online stock trading fees, share trading fees and ETF (Exchange Traded Fund) fees differ greatly between brokers. There is also a difference depending on which type of stock trading account you have such as the Trade.MT5 account which is for trading Stock CFDs or the Invest.MT5 account which is for investing in shares and ETFs. Let's take a look at the trading fees for both.
Online Stock Trading Fees for Stock CFDs
As Stock CFD trading allows users to trade on margin there are swap fees to hold trades open overnight, as well as trading spreads. Both swap values and typical spread information can be found in the Admiral Markets MetaTrader platform or through the contract specification page.
The swap trading fees for Stock CFDs are calculated differently to the Forex market and are quoted in percentages, as the example of the Apple CFD contract specification page shows below.
Source: Admiral Markets #AAPL Contract Specifications, 19 September 2019
There are also transaction fees to take into consideration when trading Stock CFDs. For example, the commission for share CFDs start from $0.01. To view the commission for the share CFD you are trading simply visit the instrument you are trading in the contract specification page. In the example above of Apple, the third row down states the Minimum Commission, USD is $2.
Share Trading Fees for Investing in Shares and ETFs
There are some similarities in the cost of investing in shares and ETFs with Invest.MT5 compared to trading share CFDs with Trade.MT5. For example, when investing in shares there are still trading spreads and trading commissions per transaction to pay. In fact, these are the same on both types of accounts and are listed above or in the contract specification page of the symbol you are trading.
However, when investing in shares the investor needs to pay the full value of the shares they are buying up front. As this type of investing does not use margin or leverage, there are no overnight swap fees to pay.
Did you know that Invest.MT5 actually allows you to invest in stocks and ETFs from 15 of the largest stock exchanges in the world? In fact, you can also gain access to free real-time market data, low transaction commission, zero account maintenance fees, complimentary premium quality market updates, dividend payouts and much, much more!
To open an account simply click on the banner below:
Bitcoin Trading Fees
Trading fees for cryptocurrencies such as Bitcoin can include spreads, swaps and a commission per transaction. With Admiral Markets, trading cryptocurrency CFDs is actually free of transactional commissions and just includes trading spreads and swaps.
Perhaps the biggest difference with Bitcoin trading fees (Bitcoin vs US Dollar CFD trading) are the swap values. These tend to be higher due to the volatile nature of the market.
Cryptocurrency CFD trading fees are shown on the contract specification page, as the example of Bitcoin trading fees (Bitcoin vs US Dollar CFD trading) shows below:
Source: Admiral Markets BTC.USD Contract Specifications, 19 September 2019
Brokerage Fees for Short-term Trading
Traders who trade short-term, such as day traders, often pay lower fees as they do not hold trades overnight thereby avoiding overnight swap fees. In some cases though, they may be missing out on markets which offer a positive carry with funds being credited to their account each night.
The most important short-term trading fees for day traders is the spread and trading commission per transaction. In essence, the lower the spread the smaller the cost to the trader, therefore, the higher overall profit in the account.
As you can see in the image above, the trading spreads vary from broker to broker with some higher and lower than others. For some new traders, seeing the difference in values may seem small. However, costs add up over time. In some cases, Dow Jones CFD traders would be paying 200% more in spread cost from the lowest spread provider to the highest. That is a significant impact on anyone's trading profit!
It really does pay off to find a broker with the most competitive fees for the markets you trade in. Unfortunately, there are some brokers who will advertise the lowest trading fees at a certain point in the day, such as the London trading session where trading activity is high and spreads are very low as there are more buyers and sellers trading the markets. However, their typical trading spreads are then much higher for the rest of the day as they mark up the spread during quieter times. Of course, not all brokers do this but some do.
It may pay off to trade with a broker who offers a high level of financial regulation such as the Admiral Markets Group which consists of the following firms:
- Admiral Markets Pty Ltd - regulated by the Australian Securities and Exchange Commission (ASIC).
- Admiral Markets Cyprus - regulated by the Cyprus Securities and Exchange Commission (CySEC).
- Admiral Markets UK Ltd - regulated by the Financial Conduct Authority (FCA).
- Admiral Markets AS - regulated by the Estonian Financial Supervision Authority (EFSA).
What Are Typical Brokerage Fees?
How do Admiral Markets' fees compare to other brokers?
The first question to consider is whether a broker is a traditional bank, as this is how investors typically bought and sold shares (the most commonly traded and invested asset) in the past. Today, most banks offer share dealing services, but these usually come with high broker fees and other charges. However, the competition from discount brokerage firms has made the fees for investing much more competitive.
Most banks offer a fixed fee per trade, which may sound enticing, but this comes with extra charges such as high minimum transaction fees. For example, HSBC Invest Direct has a minimum fee of €21.95 per trade. That means that in order to open and close a position you will have to pay €43.90 (€21.95 when you purchase the shares, and another €21.95 when you sell them).
This is a huge difference from Invest.MT5, Admiral Markets' traditional buy-and-hold investment account, where you could potentially buy €7,500 worth of shares in Adidas for a fee of just €5 to open the position, or €10, to both open and close the position. Other discount brokerages may be more competitive than the traditional banks. For example, the commission per trade for buying and selling US shares with certain brokers is $0.02, with a minimum charge of $15.
Brokerage Fee Example 1: Buying US shares in a USD account
- Account currency: USD
- Shares to purchase: Apple
- Currency of shares: USD
- Volume/amount of shares to purchase: 10 lots
- Order type: Buy
- Stock price: $155
Let's say that you want to buy 10 shares in Apple, which is trading at $155 per share:
- The investment amount would be calculated with the following sum = 10 shares x $155 per share = $1,550
- The Broker fee would be calculated with the following sum = contract size x amount of shares = 10 lots x $0.01 = $0.1
As the mathematical value of the commission ($0.1) is below the $1 minimum, the broker fee for this particular transaction is just $1.
Brokerage Fee Example 2: Buying EU shares in a EUR account
- Account currency: EUR
- Shares to purchase: Adidas
- Currency of shares: EUR
- Volume/amount of shares to purchase: 50 lots
- Order type: Buy
- Cost stock price: €150
Let's say you want to buy 50 shares in Adidas which is trading at €150 per share:
- The Investment amount would be calculated with the following sum = 50 shares x €150 per share = €7,500
- The Broker fee would be calculated with the following sum = Stock price x Contract Size x Commission Rate = €150 x 50 lots x 0.1% = €7.50
Brokerage Fee Example 3: Selling a Stock Position
When calculating the broker fee for exiting your position, the formula would be used in exactly the same way - by using the number of shares you would like to sell, the sell price of the stock or ETF your broker is quoting at the time of the transaction, and the broker fee of 0.1% of the transaction's notional value.
If you'd like to learn more about trading, or if you need to gain practical skills to advance your trading, you can do so by signing up for a FREE Admiral Markets trading webinar hosted by professional trading experts. We present several different daily and weekly trading webinars to suit the various requirements you might have, from beginners to advanced traders, from short-term trading to long-term investments.
If you wish to learn how to trade, or to learn how to open positions on currency pairs using MetaTrader trading platforms, or how to perform long and short trades, our trading webinars are the perfect place to learn all of that and so much more! Gain access to advanced chart analysis of emerging market trends, discussions of upcoming economic events and how they may affect future trading, and more. Click on the banner below to sign up for a free trading webinar today!
Brokerage Fees Comparison
Keeping track of brokerage fees across different asset classes and trading accounts may seem overwhelming. The best way to make an online trading fees comparison between different asset classes and accounts is to use the Admiral Markets Trading Calculator, alongside your Admiral Markets MetaTrader platform.
Your trading platform will give you real-time trading spreads information while the trading calculator can help you calculate your commission per transaction as well as the swap values for your trades.
For example, traders can select any of the instruments available to trade on with Admiral Markets across Forex, Stocks, Commodities, Indices, Cryptocurrency CFDs and more, as shown below!
Source: Admiral Markets Trading Calculator, 19 September 2019
Traders can then type in their volume, or unit size as a lot amount, select their account base currency and type in their opening and closing price of their trade, as well as the direction. After clicking calculate the trader will be given the monetary profit and loss for the trade as well as the commission - if any is due - and the swap value for holding a trade overnight, as shown below:
Source: Admiral Markets Trading Calculator,19 September 2019
While the example above is on EUR.AUD, traders can use this across multiple asset classes which have different commission and swap values as well as different formulas for calculation.
If you are considering investing in stocks or ETFs, or you are a seasoned investor struggling to locate the best cheap stocks to buy, then this article is a must read for you. You may be investing to build an income-producing portfolio, a long-term retirement portfolio, or perhaps simply as a hobby. Whatever the situation, understanding the costs involved will be a key component of your future success.
Why trade with Admiral Markets?
On top of low spreads and highly competitive trading fees, there are other benefits to trading with Admiral Markets:
- Trade with a well-established, highly regulated company including regulation from the highly respected UK's Financial Conduct Authority, the Australian Securities and Investments Commission, the Cyprus Securities and Exchange Commission and the Estonian Financial Supervision Authority
- Trade with a broker offering some of the lowest and transparent trading fees in the marketplace.
- Access the fastest and most secure trading platforms from MetaTrader for PC, Mac, Android and iOS.
- Trade with institutional grade spreads as low as 0 pips with Zero.MT4 and connect directly with tier one liquidity providers.
- Enjoy commission-free trading on some trading accounts, or lower spreads plus commission on other trading accounts.
- Benefit from a negative balance protection policy for peace of mind.
If you're feeling inspired to start trading, or this article has provided some extra insight to your existing trading knowledge, you may be pleased to know that Admiral Markets provides the ability to trade with Forex and CFDs on multiple asset classes, with the latest market updates and technical analysis provided for FREE!
Click the banner below to open your live account today!
About Admiral Markets
Admiral Markets is a multi-award winning, globally regulated Forex and CFD broker, offering trading on over 8,000 financial instruments via the world's most popular trading platforms: MetaTrader 4 and MetaTrader 5. Start trading today!
This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or recommendation for any transactions in financial instruments. Charts for financial instruments in this article are for illustrative purposes. Past performance is not necessarily an indication of future performance.
Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.