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What is forex commission?

What is forex commission?

Forex which is referred to as foreign exchange is basically a broker in the digital market. The forex commission is the charge to pay the broker by the investor. Simply broker acts as the middleman that makes the buy and sell for the investor, at a maximum rate they try to match the order of buy and sell from one customer to the other customer. They give a tight spread because they have established a connection with liquidity providers. The charge is a fixed foreign exchange commission.

Structure of commission:

The structure of the commission is three types one is fixed broker commission, the other is variable spread and the last one is based on the percentage of the spread. The spread price is the difference between the bid price and asks price i.e. bid price means the price that the market prepared to pay for buying currency to you and the asking price means the market maker prepared to pay for selling currency to you. There will be three pips in spread. For example if “EURUSD – 1.4952 – 1.4955.” the difference between them is 1.4952 is the bid price and 1.4955 is the asking price if the broker offers a fixed commission spread of three pips instead of a variable, in spite of the market volatility will still differ.

forex commission

When a broker offers variable spread it is expected that pip can be as low as 1.5 pips or high as 5 pips. This depends on the currency pair and market volatility. Sometimes few brokers will offer you a small commission fee which is only two-tenth of a pip, and then they will pass the order flow to a large market maker who is in a relationship with them. This arrangement gives a very tight spread to you so you can only target large traders.

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