How to get the best brokerage fees
Reading time: 21 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. But 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.
The most common type of brokerage fee is the trading spreads 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.
Online Trading Fees Comparison for Spreads
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 Commission / Trading Commission Transactional 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 Admiral.Prime 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 Admiral.Prime 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 Admiral.Markets 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.
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 Trading Fees
There are other trading fees to be aware of when trading with different brokers and can include:
- Real-time Data Broker Fees. 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. Some brokers will pass on their real-time data costs to you so beware.
- 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 Trading Fees
Forex trading fees will vary depending on the type of account offered by your broker. For example, the Admiral.Markets account allows you to trade Forex commission-free with low spreads. The Admiral.Prime 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 transactional Forex trading fees?
While Forex trading on the Admiral.Markets account is free of additional transactional fees, the Admiral.Prime 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 Admiral.Prime 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 Admiral.Prime 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 Stock Trading Fees & Share Trading Fees
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 Admiral.MT5 account which is for trading Stock CFDs or the Admiral.Invest 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 Admiral.Invest compared to trading share CFDs with Admiral.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 Admiral.Invest 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 include 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
Short-term trading fees
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).
Online trading 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.
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 Admiral.Prime 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.