Tag: Trading Fee

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Asset Analysis – Trading Costs Involved While Trading The CAD/AED Currency Pair

Introduction

Introduction

Introduction

CAD/AED is a Forex exotic currency pair, where CAD represents the currency of Canada, an AED is the currency of the UAE. In this exotic currency pair, CAD is the base first, and AED is the second currency.

Understanding CADAED

This pair’s price determines the value of AED, which is equivalent to one CAD. We can term it as 1 CAD per X numbers of AED. For example, if the CAD/AED pair’s value is at 2.8007; therefore, we need almost 2.8007 AED to buy one CAD.

CADAED Specification

Spread

In every financial market, Spread represents the difference between the Bid and Ask. It is usually a charge that is deducted by the forex broker. This value changes with the type of execution model.

Spread on ECN: 10 pips | Spread on STP: 15 pips

Fees

The trading fees in the forex market and stock market are the same. It is deducted from the traders’ accounts as soon as they open a new position. Note that STP accounts do not charge anything, but a few pips charges on ECN accounts.

Slippage

Slippage happens when price opens above or below the execution level. Slippage occurs because of two important reasons – market volatility and broker’s execution speed.

Trading Range in CADAED

Procedure to assess Pip Ranges

  1. Add the ATR indicator to your chart
  2. Set the period to 1
  3. Add a 200-period SMA to this indicator
  4. Shrink the chart so you can assess a large time period
  5. Select your desired timeframe
  6. Measure the floor level and set this value as the min
  7. Measure the level of the 200-period SMA and set this as the average
  8. Measure the peak levels and set this as Max.

CADAED Cost as a Percent of the Trading Range

The volatility values on the above table indicate how the cost varies with the change in market volatility. All we did is to get the ratio between the total cost and the volatility values and converted them into percentages.

ECN Model Account 

Spread = 10 | Slippage = 5 | Trading fee = 8

Total cost = Spread + Slippage + Trading Fee

= 10 + 5 + 8 = 23

STP Model Account

Spread = 10 | Slippage = 5 | Trading fee = 0

Total cost = Spread + Slippage + Trading Fee

= 10 + 5 + 0 = 15

The Ideal way to trade the CADAED

The CADAED is an exotic cross currency pair with higher volatility and liquidity. Because of this, traders may find it easy to trade in this pair. We can see that the percentage values above where the value did not move above 230% that represents a higher trading cost in the lower timeframe. However, when we move to the monthly timeframe, the average cost came to below 2%.

Therefore, trading intraday in this currency pair is risky due to the high trading cost. On the other hand, trading in a higher timeframe has less cost, but it requires a lot of patience and time. Overall, for every trader, it is recommended to stick on trading where the trading cost is at the average value.

Another way to reduce the cost is to place a pending order as ‘limit’ and ‘stop’ instead of ‘market.’ In that case, there will be no slippage in the calculation of the total costs. So, in our example, the overall cost will be reduced by five pips.

STP Model Account (Using limit orders) 

Spread = 10 | Slippage = 0 | Trading fee = 0

Total cost = Spread + Slippage + Trading Fee

= 10 + 0 + 0 = 10

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Everything You Should Know About The EUR/SEK Forex Pair

Introduction

Introduction

Introduction

EUR/SEK is the abbreviation for the Euro Area’s euro against the Swedish Krona. This exotic-cross currency pair has enough volatility but lacks liquidity. This is the reason this has pretty high spreads. In this pair, EUR is the base currency, and SEK is the quote currency.

Understanding EUR/SEK

The market price of EURSEK as a whole determines the value of SEK that is required to buy one euro. It is quoted as 1 EUR per X SEK. For example, if the value of this pair is 10.5839, then this amount of SEK is required to purchase one EUR.

EUR/SEK Specification

Spread

The difference between the bid price and the ask price is called the spread. This value is different from one ECN and STP accounts. The approximate values of the same are mentioned below.

Spread on ECN: 50 pips | Spread on STP: 55 pips

Fees

The fee is simply the commission paid for the trade. This, too, depends on the type of execution model used by the broker. The fee on ECN accounts is a few pips, while it is nil on STP accounts.

Slippage

The slippage is the difference between the trader’s intended price and the broker’s executed price. There is this difference because orders are executed by the ‘market.’ The two main reasons for slippage to occur include, broker’s execution speed & Market volatility.

Trading Range in EUR/SEK

With the values in the trading range, which depict the pip movement in different timeframes, we can determine the gain or loss that is possible on trade.

These values are obtained by combining the moving average with the average true range indicator. A complete procedure to get it into your charts is given below.

Procedure to assess Pip Ranges

  1. Add the ATR indicator to your chart
  2. Set the period to 1
  3. Add a 200-period SMA to this indicator
  4. Shrink the chart so you can assess a large time period
  5. Select your desired timeframe
  6. Measure the floor level and set this value as the min
  7. Measure the level of the 200-period SMA and set this as the average
  8. Measure the peak levels and set this as Max.

EUR/SEK Cost as a Percent of the Trading Range

Firstly, the total cost is calculated by finding the sum of the spread, slippage, and trading fee. And this cost varies as the volatility of the market changes. Below is a table that represents the cost variation for EURSEK for both ECN and STP accounts.

ECN Model Account 

Spread = 50 | Slippage = 3 | Trading fee = 3

Total cost = Spread + Slippage + Trading Fee = 50 + 3 + 3 = 56

STP Model Account

Spread = 55 | Slippage = 3 | Trading fee = 0

Total cost = Spread + Slippage + Trading Fee = 55 + 3 + 0 = 58

Note: The costs may seem high because of the Spreads. As we know, these Spreads keep changing from time to time. At times we have seen the spreads for this pair being as low as 10. But we have considered the maximum spread to give you the maximum cost percentages.

The Ideal way to trade the EUR/SEK

From the trading range table, we can clearly see that the volatility in this pair is pretty high. However, this does not mean that it cannot be traded.

Coming to the next two tables, the percentage values are within the 600% mark. Note that the higher the value of the percentages, the higher is the cost. The opposite holds true, as well. Since the percentage values are high in the min column, we can conclude that the costs are high when the volatility of the market is low.

Now, to have a balance between the costs and the volatility, one must trade during those times when the volatility of the market is around the average values in the trading range table.

Moreover, there is a way through which we can nullify the slippage on the trade. This can simply be done by placing orders using ‘limit’ instead of ‘market.’ In doing so, the total cost will reduce by a decent amount.

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Forex Assets

USD/DKK – Analyzing the Exotic Forex Pair

Introduction

Introduction

Introduction

USD/DKK is the abbreviation for the US Dollar against the Danish Krone. This pair is considered as an exotic currency pair that typically presents high volatility and low trading volume. The US Dollar is the base currency, and the Danish Krone is the quote currency.

Understanding USD/DKK

The value of USD/DKK represents the value of DKK that is equivalent to one US Dollar. It is quoted as 1 USD per X DKK. So, if the current value of this pair is 6.9868, then these many Danish Krones are required to purchase one US Dollar.

Spread

Spread is the difference between the bid and the ask price of a currency pair. It is the primary way through which brokers generate revenue. It varies from broker to broker and also the model of execution.

ECN: 14 pips | STP: 15 pips

Fees

The fee is simply the commission that you pay on each trade you take.

Fee on ECN – 3-6

Fee on STP – 0

Slippage

Slippage is the difference between the price which was intended by the client and the price he got from the broker. This difference changes with the market’s volatility and the broker’s execution speed. Slippage on exotic pairs is typically high.

Trading Range in USD/DKK

As it is pretty evident from the table, the trading range is an illustration of the pip movement in a currency pair in different timeframes. These values help us determine the minimum, average, and maximum profit or loss that can be incurred in a trade during a specified time frame. Another application for this table is discussed in the next topic.

Procedure to assess Pip Ranges

  1. Add the ATR indicator to your chart
  2. Set the period to 1
  3. Add a 200-period SMA to this indicator
  4. Shrink the chart so you can determine an extensive period
  5. Select your desired timeframe
  6. Measure the floor level and set this value as the min
  7. Measure the level of the 200-period SMA and set this as the average
  8. Measure the peak levels and set this as Max.

USD/DKK Cost as a Percent of the Trading Range

Cost as a percent of the trading range is an application to the above volatility table. The below two tables depict the total cost variation in different volatilities and timeframes for ECN and STP accounts.

Note: The percentages are obtained by finding the ratio between the total cost and the pip movement values in the above table.

ECN Model Account

Spread = 14 | Slippage = 3 |Trading fee = 3

Total cost = Slippage + Spread + Trading Fee = 3 + 14 + 3 = 20

STP Model Account

Spread = 15 | Slippage = 3 | Trading fee = 0

Total cost = Slippage + Spread + Trading Fee = 3 + 15 + 0 = 18

The Ideal way to trade the USD/DKK

What do the percentage values mean? Comprehending the above tables is simple. The higher the magnitude of the percentage, the higher are the costs for that particular volatility and timeframe. Similarly, lower percentage values mean that the costs are low.

Trading during high volatilities or when the cost is high is not ideal. So, to ensure an equilibrium between the two, it is best to enter the market during those times when the volatility is around the mid values illustrated in the volatility table.

Apart from this, one can reduce their total costs significantly by placing orders using limit/pending orders instead of market orders. This will altogether remove the slippage factor on the total cost and bring down its value by a high number.

As already mentioned, exotic currency pairs are highly volatile and have low trading volume. This results in higher costs on the trade. Hence, if you really want to trade this pair, it is recommended to follow the above-mentioned mentioned techniques to reduce costs by a considerable amount. Cheers!

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Understanding The USD/HKD Exotic Forex Pair

introduction

introduction

introduction

USDHKD is the abbreviation for the US dollar and the Hong Kong dollar. The USDHKD is an exotic currency pair. Exotics are pairs that are thinly traded in the foreign exchange markets and are not widely used in the global markets. One can expect high volatility and low volumes on this pair. Here, USD is referred to as base currency and HKD as the quote currency.

Understanding USD/HKD

The value of USDHKD represents the value of the Hong Kong dollar that is equivalent to one US dollar. It is quoted as 1USD per X HKD. For example, if the market price of USDHKD is 7.7684, then these many units of HKD are required to purchase one USD.

Spread

Spread is the difference between the bid price and the ask price of a currency pair. This value is set by the brokers, and it varies from different brokers. The type of execution model brings a variation in the spreads.

ECN: 5 | STP: 9

Fees

When you execute any trade through your brokers, there is a fee that has to be paid. The fee differs from brokers to brokers, as well as their execution type. Typically, there is no fee on STP accounts.

Slippage

Slippage is the difference between the trader’s intended price to execute a trade and the price he actually received from the broker. There is always this difference due to the volatility of the market and the broker’s execution speed. As a matter of fact, slippage is pretty high on exotic pairs.

Trading Range in USD/HKD

The trading range is the depiction of the minimum, average, and maximum pip movement of a currency pair. And these values help in assessing one’s risk on a trade. By finding the product of the volatility value with the pip value, you can determine the profit or loss that can be incurred in a specified timeframe.

Procedure to assess Pip Ranges

  1. Add the ATR indicator to your chart
  2. Set the period to 1
  3. Add a 200-period SMA to this indicator
  4. Shrink the chart so you can determine a large time period
  5. Select your desired timeframe
  6. Measure the floor level and set this value as the min
  7. Measure the level of the 200-period SMA and set this as the average
  8. Measure the peak levels and set this as Max.

USD/HKD Cost as a Percent of the Trading Range

This calculation is an extremely helpful tool to analyze the cost variations in a trade. This table is basically a representation of the total cost variations in different timeframes and volatilities of the market. The costs are represented as a percentage of the range, and the magnitude of it depicts the cost of the trade.

ECN Model Account

Spread = 5 | Slippage = 5 |Trading fee = 1

Total cost = Slippage + Spread + Trading Fee = 5 + 5 + 1 = 11

STP Model Account

Spread = 9 | Slippage = 5 | Trading fee = 0

Total cost = Slippage + Spread + Trading Fee = 9 + 5 + 0 = 14

The Ideal way to trade the USD/HKD

Exotic pairs are expensive to trade when compared to major and minor currency pairs. However, it does not mean that one must completely avoid it. There are a few ways by which one can minimize the costs on the trade and take positions on it.

The higher the magnitude of the percentage, the higher is the cost of the trade. It is evident that the values are significant on the min column and comparatively small on the max column. Hence, costs are high for low volatilities markets and vice versa.

When it comes to picking the right time to enter the market, it is ideal to take positions when the volatility of the market is around the average values. From this, one can be guaranteed with affordable costs and decent volatility.

Slippage has a significant weight on the total cost of a trade. However, slippage can be wiped out. Trading using limit orders instead of market orders will take away the slippage on the trade. The next table displays the costs using limit orders.

Spread = 5 | Slippage = 0 |Trading fee = 1

Total cost = Slippage + Spread + Trading Fee = 5 + 0 + 1 = 6

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Forex Assets

Basics Of Trading The AUD/CHF Currency Pair & Analyzing The Trading Costs Involved

Introduction

Introduction

Introduction

AUDCHF is the abbreviation for the Australian dollar and the Swiss franc. It is a cross-currency pair in the market. AUD being on the left is the base currency, and CHF (on the right) is the quote currency. One can expect high volatility and liquidity during the Australian session.

Understanding AUD/CHF

The value of AUDCHF represents the amount of Swiss Francs required to buy one Australian dollar. It is quoted as 1 AUD per X CHF. For example, if the value of AUDCHF is 0.6885, then this number represents the CHF that is to be produced by the trader to buy one AUD.

AUD/CHF Specification

Spread

Spread is the difference between the bid price and the ask price of the market set by the brokers. It is not a fixed value. It differs from the account type as well as the broker.

ECN: 0.7 | STP: 1.7

Fees

Brokers charge a fee on every trade a trader takes. It could be per execution or finished trade (round trip). Also, it varies from the type of account model. Typically, fee on ECN type is 5-10 pips, and 0 on STP type.

Slippage

Slippage is the difference between the price demanded by the trader and the price he actually received from the broker. There is always a variation in this due to the broker’s execution speed and market volatility.

Trading Range in AUD/CHF

Wanting to know how much profit one can make in a given time? If so, then you may find the answer in the table illustrated below. This table is the representation of the min, average, and max volatility of the currency pair in different timeframes. And with these values in the table, one can determine the profit on a trade.

Procedure to assess Pip Ranges

  1. Add the ATR indicator to your chart
  2. Set the period to 1
  3. Add a 200-period SMA to this indicator
  4. Shrink the chart so you can determine a significant period
  5. Select your desired timeframe
  6. Measure the floor level and set this value as the min
  7. Measure the level of the 200-period SMA and set this as the average
  8. Measure the peak levels and set this as Max.

AUD/CHF Cost as a Percent of the Trading Range

The cost as a percent of the trading range is determined in the following table using different volatilities, assuming that the trading range can be seen as the potential profit on a given timeframe. The percentages are obtained by finding the ratio between the total cost of the trade and the range values. These values, thus, help in assessing the right moments in the day to trade the currency pair.

ECN Model Account

Spread = 0.7 | Slippage = 2 |Trading fee = 1

Total cost = Slippage + Spread + Trading Fee = 2 + 0.7 + 1 = 3.7

STP Model Account

Spread = 1.7 | Slippage = 2 | Trading fee = 0

Total cost = Slippage + Spread + Trading Fee = 2 + 1.7 + 0 = 3.7

The Ideal way to trade the AUD/CHF

Firstly, the higher the value of the percentage, the higher is the cost of the trade. It is pretty evident from the above tables that the costs are higher in the min column and keep decreasing in the subsequent columns. Meaning, as the volatility increases, the total cost of the trade reduces. But, it is not ideal to trade in either of the extremes. To have an affordable cost and optimal volatility, it is best to enter during those times of the day when the pip movement for the pair is more or less equal to the average values.

Furthermore, the total cost can easily be reduced by trading using limit order instead of market orders. This methodology would bring down the slippage to zero. Hence, significantly affecting the percentage values. And an example of the same is depicted below.

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Understanding The EUR/JPY Asset Class

Introduction

Introduction

Introduction

The Euro area’s euro against the Japanese yen, in short, is termed as EURJPY. This pair, too, like the EURCHF, EURNZD, EURCAD, EURGBP, etc. is a minor or cross currency pair. It is one of the most traded currency pairs in the forex market. Here, the EUR is the base currency, and JPY is the quote currency. The value of this pair is quoted in terms of the quote currency.

Understanding EUR/JPY

This currency pair is precisely quoted as 1 EUR per X JPY. In simple terms, the value determines the units of the quote currency (JPY) required to buy one unit of the base currency (EUR). For example, if the market value of EURJPY is 121.00, it basically means that these many yen are required to purchase one euro.

EUR/JPY Specification

Spread

Spread is the difference between the bid price and the ask price set by the broker. This value is not constant and varies from broker to broker. It also varies on the type of account model.

Spread on ECN model: 0.6

Spread on STP model: 1.5

Fees

Spread is not the only way through which brokers generate their revenue. They charge some fee (commission) on each trade as well. Fees again vary from broker to broker and account model. Typically, there is no fee on an STP account. However, there are a few pips or fees on an ECN account as their spread is lesser than an STP account.

Slippage

Slippage is the difference between the trader’s asked price and the actual price given to him. Two factors majorly affect slippage on a trade; one, the volatility of the market, and two, broker’s execution speed. The slippage is usually within 0.5 to 5 pips. For major currencies, the slippage is much lower.

Trading Range in EUR/JPY

The trading range is the illustration of the minimum, average, and the maximum number of the pips the currency pair has moved in a given time frame. These values help assess the profit/loss potential of a trade. For instance, if the max volatility on the 1H is 10 pips, then one can expect to win or lose a maximum of $92 (10 pip x 9.20 value per pip) in an hour or two.

Procedure to assess Pip Ranges

  1. Add the ATR indicator to your chart
  2. Set the period to 1
  3. Add a 200-period SMA to this indicator
  4. Shrink the chart so you can determine an extensive period
  5. Select your desired timeframe
  6. Measure the floor level and set this value as the min
  7. Measure the level of the 200-period SMA and set this as the average
  8. Measure the peak levels and set this as Max.

EUR/JPY Cost as a Percent of the Trading Range

In addition to assessing the profit/loss in a timeframe ahead of time, we can use these values in determining the cost variation in different timeframes and volatility as well. The cost as a percent of the trading range tells the min, average, max costs by considering the timeframes and volatility as its variables.

ECN Model Account 

Spread = 0.6 | Slippage = 2 | Trading fee = 1

Total cost = Slippage + Spread + Trading Fee = 2 + 0.6 + 1 = 3.6

STP Model Account

Spread = 1.5 | Slippage = 2 | Trading fee = 0

Total cost = Slippage + Spread + Trading Fee = 2 + 1.5 + 0 = 3.5

The Ideal way to trade the EUR/JPY

Above are the costs of each trade in terms of percentages. Note that they do not represent the actual cost on trade in terms of dollars, but are magnitude values which can be used for comparing with other values. The higher the magnitude of the percentage, the higher is the cost on the trade for that particular timeframe and volatility. From the tables, it can be ascertained that the values are highest on the min column and lowest on the max column. This, in turn, implies that the costs are higher when the volatility is low and vice versa. Talking about the timeframe, the costs are high on the lower timeframes and low on the higher timeframes. So, a day trader may preferably trade on the 2H/4H when the volatility is around the average values. And long-term traders may trade the 1W/1M whatsoever be the volatility of the market.

Furthermore, a trader may reduce their costs by entering and exiting trades using limit order instead of market orders. This will completely erase the slippage on the trade. An example of the same is given below.

Total cost = Spread + trading fee = 0.6 +1 = 1.6

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Everything About EUR/CAD Currency Pair

Introduction EURCAD is the abbreviation for the currency pair Euro area’s euro and the Canadian dollar. This is a cross-currency pair, as it does not involve the US dollar. In EURCAD, EUR is the base currency, and CAD is the quote currency. The price of this pair basically tells the value of CAD w.r.t EUR. […]

Introduction EURCAD is the abbreviation for the currency pair Euro area’s euro and the Canadian dollar. This is a cross-currency pair, as it does not involve the US dollar. In EURCAD, EUR is the base currency, and CAD is the quote currency. The price of this pair basically tells the value of CAD w.r.t EUR. […]

Introduction

EURCAD is the abbreviation for the currency pair Euro area’s euro and the Canadian dollar. This is a cross-currency pair, as it does not involve the US dollar. In EURCAD, EUR is the base currency, and CAD is the quote currency. The price of this pair basically tells the value of CAD w.r.t EUR.

Understanding EUR/CAD

The current market price of EURCAD determines the required Canadian dollars to purchase one euro. It is quoted as 1 EUR per X CAD. For example, if the CMP of EURCAD is 1.4700, it is as good as saying that 1.4700 CAD is needed to buy one EUR.

EUR/CAD Specification

Spread

The algebraic difference between the bid price and the ask price set by the broker is known as the spread. Spread varies from time to time and broker to broker. The approximate spread value on an ECN account is 0.8, and on an STP account is 1.8.

Fees

For every position that a trader opens, there is some fee associated with it. And it depends on the type of account model. It is seen that there is no fee on STP accounts and a few pips on ECN accounts.

Slippage

Slippage is terminology in trading, which, by definition, is the difference between the trader’s wished price and the real executed price. That is, the trader does not get the exact price he had intended for. There is some variation due to the volatility of the market and the broker’s execution speed. It usually varies from 0.5 to 5 pips on these minor currency pairs. The slippage is typically lesser on major currency pairs.

Trading Range in EUR/CAD

The trading range is an illustration of the minimum, average, and maximum pip movement in EURCAD. It determines the volatility of the market. The volatility of the market is a vital piece of information in trading, as one can assess the time that can be taken on each trade. And by applying more variables to it, one can determine the cost varies on the trade as well.

Procedure to assess Pip Ranges

  1. Add the ATR indicator to your chart
  2. Set the period to 1
  3. Add a 200-period SMA to this indicator
  4. Shrink the chart so you can assess a large time period
  5. Select your desired timeframe
  6. Measure the floor level and set this value as the min
  7. Measure the level of the 200-period SMA and set this as the average
  8. Measure the peak levels and set this as Max.

EUR/CAD Cost as a Percent of the Trading Range

Cost as a percent of the trading range is a simple yet very effective application of the above volatility table. There is a cost on every trade you take. The total cost of a trade is the sum of slippage, spread, and trading fee. This total cost is divided by the volatility values and is expressed in terms of a percentage. And the percentage values are used to figure out the best times of the day to enter and exit a trade with marginal cost.

ECN Model Account 

Spread = 0.8 | Slippage = 2 | Trading fee = 1

Total cost = Slippage + Spread + Trading Fee = 2 + 0.8 + 1 = 3.8

STP Model Account

Spread = 1.8 | Slippage = 2 | Trading fee = 0

Total cost = Slippage + Spread + Trading Fee = 2 + 1.8 + 0 = 3.8

The Ideal way to trade the EUR/GBP

To determine the ideal way of trading the EURCAD, let us first comprehend what the percentage means.

High percentage => High cost

Low percentage => Low cost

Min column => Low volatility

Max column => High volatility

From the table, we can infer that the percentages are high in the min column and low for the max column. So,

Min column => High percentage

Thus, Low volatility => High cost

Max column => Low percentage

Thus, High volatility => Low cost

It is not ideal during low volatility as costs are high. Also, trading during high volatility is not a good idea as it is quite risky. Hence, to have a balance between both volatility and cost, it is ideal to trade when the pip movement on the currency pair is at the average values.

Another simple hack to reduce the costs is to trade using limit orders instead of market orders. Doing so, the slippage will be automatically cut off from the trade, and the total cost will significantly reduce.