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FXClub.com Tip: Forex broker commissions do not generally exist with the small brokerage firms and individual brokers. Most forex brokers do not take commission on buy/sells/trades, opening or closing an account, or any other direct commission. Larger financial institutions may charge a forex broker commission in the same manner a stock or bonds broker earns a commission. However, for the average forex trader, there is no forex broker commission. That does not mean that the forex broker isn't getting an income from trading. Traditionally, a stock broker commission is per unit, volume or price. For forex broker commissions, there is not a direct commission per unit, volume or price of the forex trade. The pip spreads are the money makers.
Pips are the digits counted out to the fourth decimal place. The pip spread is the difference between the bid price (buy) and the ask price (sell), and also includes interest generated overnight. So, a broker commission still exists in a roundabout manner, but instead of the traditional per unit commission it is based on the difference between the buyer and seller currency pair prices.
|Jennifer Mathes, Ph.D.|