July 4, 2008, Newsletter Issue #61: Brokerage Commissions and Forex Pip Spreads

Tip of the Week

Brokerage commissions are not direct volume-price commissions in forex. Instead, brokers often earn income by the pip spreads. The spread is a difference between bid/ask price. The brokerage commissions are not direct, but the broker earns income based on this difference. The pip is the fourth decimal place on a monetary unit. Smaller spreads mean more trader value and less broker earnings. Pips vary according to the currency pairs being traded. FX Club’s current pips are:

3 pips: EUR/USD
4 pips: USD/CHF, USD/JPY, EUR/CHF, EUR/JPY,
5 pips: GBP/USD, EUR/GBP, USD/CAD, AUD/USD
6 pips: CHF/JPY
8 pips: GBP/JPY. GBP/CHF
12 pips: AUD/JPY, EUR/CAD
15 pips: GBP/CAD

The spread is usually only charged when you buy or sell, not when you buy and sell simultaneously. The pip spreads may not seem like much, but when the number of transactions and volumes of transactions are added up there can be a large difference in the trading cost.

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Greetings,

Forex Club is excited to announce a special program. When you open a new trading account we will deposit $100 on it to help you to get started with Forex trading. Since there are no fees to open an account, in essence, this means that you can start actual forex trading without spending a single dollar. Sounds like a pretty good deal, does not it? This is way better than a demo account. You can find out details about this promotion program here: http://www.fxclub.com/incentive

Thank you for your interest and good luck!
Forex Club, New York