Hidden Costs of Trading You Must Know

31 Ağu

In this educational article, we will discuss the hidden costs of trading.

1 - Brokers' Commissions

Trading commission is the brokers' fee for opening a trading position.
Usually, it is calculated based on the size of the trade.

Though most of the traders believe that trading commissions are too low to even count them, the fact is that trading on consistent basis and opening a couple of trading positions weekly, the composite value of commissions may cut a substantial part of our profits.

2 - Education

Of course, most of the trading basics can be found on the Internet absolutely for free.
However, the more experienced you become, the harder it is to find the materials. So you typically should pay for the advanced training.



Moreover, there is no guarantee that the course/coaching that you purchase will improve your trading, quite often traders go through multiple courses/coaching programs before they become consistently profitable.

3 - Spreads

Spread is the difference between the sellers' and buyers' prices.
That difference must be compensated by a trader if one wished to open a trading position.



In highly liquid markets, the spreads are usually low and most of the traders ignore them.
However, being similar to commissions, spreads may cut the substantial part of the overall profits.

4 - Time

When you begin your trading journey, it is not possible to predict how much it will take to become a consistently profitable trader.
Moreover, there is no guarantee that you will become one.



One fact is true, you should spend a couple of years before you find a way to trade profitably, and as we know, the time is money. More time you sacrifice on trading, less time you have on something else.

5 - Swaps

Swap is the fee you pay for transferring a position overnight.
Swap is based on a difference between the interests rates of the currencies that are in a pair that you trade.
Occasionally, swaps can even be positive, and you can earn on holding such positions.
However, most of the time the swaps are negative and the longer you hold your trades, the more costly your trading becomes.

The brokers' commissions, spreads and swaps compose a substantial cost of our trading positions. Adding into the equation the expensive learning materials and time spent on practicing, trading becomes a very expensive game to play.
However, knowing in advance these hidden costs, the one can better prepare himself for a trading journey.

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