Costs Involved In Forex Day Trading

Forex traders, especially the newcomers are often very attracted to day trading. But they often overlook the aspects of the costs involved in forex day trading, which often lead to the trader’s failures. Hence it becomes necessary and important to know about the forex day trading costs, how to adjust and limit them.

Enumerated below are the costs involved in forex day trading online:

1. Equipment for day trading

Forex day trading requires a little more sophisticated trading systems and real time filtering software. The prices of these can run into thousands of dollars. Using multiple monitors or even multiple computers is common among day traders. A fast internet connection is essential for day trading. So, research about these costs in forex day trading before you start.

2. Brokerage

Forex day traders use direct access brokers, who are faster in executing their trades and send their orders directly to the ECNs. They also charge lower commissions than the usual retail brokers and thus reduce the cost of trading.

3. Commission

Commissions are one of the many costs involved in forex day trading online and are calculated based on volume of the trades. So, the more you trade, the lower the commission is.

4. Spread

Most forex markets operate on a bid-ask-based system. The bid-ask spread is looked upon as two sides of the same coin. The spread can be seen as trading bonuses or forex day trading costs according to different parties and different strategies. Day traders who do not queue their order and pay the market price, pay the spreads and thus the costs. Where as, the traders who wish to queue and wait for execution of their trades, receive the spreads as bonuses.

5. Market Data

Market data is very essential for day traders. But if one requires a real-time data, this may need paying fees to the respective stock exchanges. It is usually combined with the broker's charges. But these fees are usually very less in comparison to the other costs of trading. Sometimes these fees are waived away too if the trader is able to meet the minimum monthly volume of trades.

In addition to the above mentioned costs involved in forex day trading, some day traders are seen to purchase more advanced data feeds, including historical data and features such as scanning large numbers of stocks in the live market for unusual activity. Some may go for complicated analysis and charting software too, which can cost thousands of dollars.

People who have taken the decision to participate in day trading should become well familiar with the forex day trading costs and make sure to not have problems with this industry.