Broker Guide To Forex.com: Commission Structure
Forex.com does not charge any trading commissions or transaction fees, but is instead compensated purely through the bid/ask spread, like many other forex brokers around the world. Essentially, the company acts as a "market maker" of sorts by selling at the ask, buying at the bid and profiting from the difference rather than by charging a per-trade commission.
The company offers very competitive, reliable and transparent spreads leveraging its unique technology and deep liquidity network of bank trading partners. In 2011, the company filled 100% of its limit orders at the requested price or better, with 65% of those receiving price improvement and all the while executing 99.9% of all trades in less than one second.
The company's Execution Scorecard details these averages each month in order to hold it accountable for its performance The report includes execution speeds, prices, rates, the percent of limit orders where prices improved and the average price improvement per limit order, among others.
Other potential fees include a $15 monthly data fee, if there is no trading activity or open positions for a period of 90 days or more. However, this can be avoided by contacting Forex.com to close the account. All banking fees, including wire transfers, are also the responsibility of the customer and are deducted from the customer's trading account.
Target and Live Spreads
Forex.com publishes typical spreads for each month rather than setting target spreads, since they tend to vary based on the market's liquidity. Live spreads are also published in real-time on the company's website to provide greater insight for traders. Finally, the firm publishes a real-time comparison of its spreads and an aggregate figure from over 150 leading banks (GTIS).
Some examples of spreads from October 2012 include:
- EUR/USD - 1.7
- USED/JPY - 1.4
- AUD/USD - 1.6
- USD/CHF - 1.6
Margin Rates and Requirements
As with other forex brokers, Forex.com permits margin trading in order to leverage returns on currency movements. Margin is essentially a good faith deposit required to maintain open positions, with brokers putting up the rest of the capital needed to capitalize on the microscopic movements in currency pairs that are often measured in fractions of a cent.
Forex.com's minimum margin requirement is 2% - or 50:1 - for all currency majors, 5% - or 20:1 - for all currency minors and 100% - or 1:1 - for spot gold and silver contracts. Margin levels can also be changed manually to either 50:1, 20:1 or 10:1. While this is lower than many other retail forex brokers, these modest levels help to contain the risks associated with the trades.
When considering margin levels, it's important to traders to remember that open positions are required to be fully margined at all times. There are no margin calls in forex trading, which means that if an account falls below the 100% maintenance margin, all open positions are subject to automatic liquidation, potentially resulting in losses.
In addition to these programs, the company offers Negative Balance protection that will credit accounts to a zero balance if they go into negative equity as a result of a liquidation event. This coverage protects traders to up to 50,000 of the account's base currency.
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