Trying to figure out a broker based on commissions and my leverage

Discussion in 'Forex' started by Rocko Bonaparte, Mar 24, 2014.

  1. I'm trying to figure out if my strategy is actually viable or if it gets cut to ribbons on commissions. I haven't actually traded forex yet, and I get caught up on the math. It's not so much the math itself but the terms that mix me up. I was trying to interpret Dukascopy's rates and came up with something like this. I hope somebody could confirm or correct my math. I would be curious about how to factor other brokers into this, and see if I could be doing much better.

    Let's say I'm doing nano lots. I don't know if I can do nano with Dukascopy, but I'm just picking something. Let's also say I want to use $100k USD, with some to spare for commissions. I'm trading EURUSD and want to open a long position at, say, 1.34866. I am trying to leverage 1:30. Let's also assume I have sufficient money deposited to cover margin; I don't want to get into how much quite yet.

    $100k USD means I can command $3M. USD Divided by my current rate of 1.34866 that's 2224430.165EUR. That would be 22244 nano lots.

    In Dukascopy's formula, assuming >= 50,000 in their account, it looks like the commission is $18USD per $1M. I assume due to leverage then that I'm paying for that $3M. I assume then that means my commission is $18 USD/$1M USD * 3M USD = $54USD for that position. Is that right? If so, is that just one way?

    I can kind of understand given the volumes of money involved, but it does mess me up if that is true. I wonder how commissions work that are on the spread? My strategy looks like it works if I assume I always get the worst price in the spread upon entering and exiting. Do brokerages that work on spread have something that makes it even more difficult than that?
  2. I guess I shouldn't be surprised people don't want to jump into the math. :p I was thinking I was probably correct, and that I should look into a brokerage charging on a spread. I see Oanda has an average spread of 1.2 pips. I figured out how to force Amibroker to add that as a premium to my buy price. It looks like I could still function in a model like that, but it does blunt the edge a bit.

    It looks like the strategy I came up with is more like scalping. The average position length is about 8 bars (minutes), trading twice an hour. Scalping and commissions don't really play too well together--hell, how does anybody really scalp? So I think I should look into getting into longer positions, less of them, and for a more substantial return per position. Maybe my pet unicorn will help me. :D
  3. 1245


    I don't do any FX. I have looked into it. The retail accounts all made their money on the pip spread. The institutional accounts all charge a commission/$1m. I did not speak to anyone that charges both. The institutional platforms should display the different banks spread without adding a larger spread. The retail accounts take the bank markets and widen them to give them their profit.

    When you choose an FX broker, don't just look at commissions and spreads. Counter party risk is everything. You want your account and cash to still be there tomorrow. Stay away from small FX dealers, in my opinion.

  4. Yeah I saw some old threads about creep brokerages. Something came up about one that allowed 1:500 leverage that was in Mauritius. Somebody brought up they work by slipping so badly handling your orders that you get royally screwed.

    I think I may take this discussion to the brokerage subforum since now I'm just trying to look into all the different commission models. If I understand it correctly, it looks like commissions eat more than the profit I would have had if I had deployed this strategy.
  5. w3c


    I think it's nearly impossible for you to reach TP and you have to make a lot of trades, and each trade get charged commission by broker. So they can earn more than $54/$3M, am I right?