Is this question about how much money you need to get into Forex trading and open an account? Then the answer is “No.” While some forex traders or platforms allow you to open an account with as little as $5, you just need about $100 to trade in forex.
Only this much expense that you need to incur? Not really. Here are four more avenues of “cost” when trading in forex:
- Most forex brokers charge a fixed fee (or percentage) for entering and exiting from forex trade. Even with the same broker, commissions can vary for currency pairs (lower for popular currencies and higher for other pairs). Overall, forex commission costs are lower than those for stock trading.
- Price spread:
We have two price components. One is the “Bid” price (or buyers are willing to pay for a currency pair). And, the other is the “Ask” price (or the price that the seller has agreed to for a currency pair). What makes these two price component is the “Price Spread”, i.e. price exercises.
- Rollover cost:
Remember that every forex trading involves two currencies – that each has a different interest rate, which changes regularly. As a trader, you can incur rollover costs if you hold a position across days. This cost can be high if there is a large interest differential between the two currencies.
- Trading gains (or losses): Yes, technically, this does not account for a “cost” factor. What trading strategy does your broker use? Some trading platforms limit your actual trade to 1% (or max. 10%) of your total capital. So, if you are investing $100, you can only trade in the $1 to $10 margin.
As a forex investor, you must consider each of these cost factors to decide if forex trading is expensive or not.
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