Question about Fixed Spread VS Commission

[4x=0]

I just bought 21 lots of usd/jpy on demo.

My commission sits at $49.61 and when I exit the trade there will be another $49.61.

That is a total of $99.22.

NOW. with 21 lots of usd/jpy I am making/losing $17.66 per PIP.

To makes things simple, let me just divide my total commission with the price per PIP.

99.22 / 17.66 = 5.618346546

That is basically a 6 point spread.

TELL ME I'M WRONG!

[4x=0]

Oh gee, I forgot to add the 1 pip spread that I already paid.

Make that a total of a 7 PIP spread USD/JPY.

[jhtumblin]

It is not atypical to be paying 3-5 pips with fixed spread brokers. The reasons for this are that there is really no such thing as a "fixed" spread in the market, and if they are charging any fees on top of that it looks worse.

If you are using a commission only broker, you are better off because then you only pay the round turn commission period plus the spread IF you place a market order. There are many times, depending on the currency you are trading, where you will pay less than 1 pip for the spread or even have no spread at all. And in all reality, the spread never exists because the trade only has to go in your direction far enough to cover comissions.

Example:

I use EFX group/mbtrading which is comission only. For the GBP/USD it costs me $1.94 for a round turn on a single mini lot. That means I only have to make 2 pips to be in the profit column.

Say I am trading at 6pm and the actual spread is 4 pips, I place a market order and get the ask price plus the commissions, as soon as some liquidity comes in the spread closes and I am still only down 2 pips from the comission costs, it's like the spread doesn't exist.

Now then take gain capital as a broker for example who has a fixed 3 pip spread on their lots. (I know they don't trade mini's but for simplicity's sake) You buy 1 mini lot at the same time I did with EFX Group at market. so you get the same ask price with the 4 pip actual spread + their 3 pip fixed spread....the volatility comes in to close the spread just the same except now you are not down just 3 pips, you are down 3 + 2 = 5 pips.

So in essence you have to make up 5 pips to get into the green whereas I only have to make up 2 pips to get into the green.

FIXED COMISSION IS BETTER! there is no arguing it. If you want to avoid the situation above which is worst case scenario with both a fixed spread and fixed comm broker, then just use limit orders during non-volatile trading periods. You are guaranteed to only pay the commission on trades no matter what a fixed spread broker says.

[4x=0]

You have some good points, but as I stated in my first post: 7 PIP SPREAD IS NOT AS GOOD AS A FIXED 3 4 OR 5. I'M SAYNIG IT NOW.

[jhtumblin]

what i'm saying is that if you had entered the same trade at the same time with a fixed spread broker you wouldn't have gotten a 3 pip spread. A broker with a fixed spread can't make money if they are placing their bids and asks inside the real/actual spread.

[4x=0]

So you are telling me that fixed spread brokers do not offer fixed spreads?

That if the fixed spread was 3 pips, and i placed the same order at the same time with a fixed-spread broker, I would not have recieved a 3 pip spread ?

I think you are wrong about this. In fact I think what you are refuting is the benefit of a fixed spread broker, that and the fact there is no commisson.

Besides, the 3 pip fixed spread would not be between the real spread. The real spread was only 1 pip. The damage was done with the exorbitant, king-sized commission.

If I knew how to avoid such a commission, I would abide.

[TheRumpledOne]

I just bought 21 lots of usd/jpy on demo.

My commission sits at $49.61 and when I exit the trade there will be another $49.61.

That is a total of $99.22.

NOW. with 21 lots of usd/jpy I am making/losing $17.66 per PIP.

To makes things simple, let me just divide my total commission with the price per PIP.

99.22 / 17.66 = 5.618346546

That is basically a 6 point spread.

TELL ME I'M WRONG!

YOU ARE WRONG!

Tell me what the answer is if you only trade 1 lot!!

You are comparing apples to oranges.

[4x=0]

I didn't trade 1 lot. I traded 21 lots.

I just bought 21 lots of usd/jpy on demo.

My commission sits at $49.61 and when I exit the trade there will be another $49.61.

That is a total of $99.22.

NOW. with 21 lots of usd/jpy I am making/losing $17.66 per PIP.

To makes things simple, let me just divide my total commission with the price per PIP.

99.22 / 17.66 = 5.618346546

That is basically a 6 point spread.

TELL ME I'M WRONG!

YOU ARE WRONG!

Tell me what the answer is if you only trade 1 lot!!

You are comparing apples to oranges.

[4x=0]

99.22 / 21 = 4.7 (commission round trip)

17.66/21 = .840952381 (p/l per pip)

4.7/.840952381 = 5.58 aka 6 pips.

6 commision pips + 1 real pip = 7 pip spread.

[jhtumblin]

trade a demo with a fixed spread broker and you will see the difference, that is all I can say.