It is one of the most talked-about advantages of trading on the Forexthe commission-free trades! Unfortunately, while we would all like to think that Forex brokers are just out there executing trades for the fun of it, the simple truth is that everyone needs to make moneyeven the brokers. While they may not charge a traditional commission, brokers on the Forex still make their money whenever trades take place. Brokers actually are compensated in a number of ways, including:
Buying/Selling Currencies
Earned interest on deposited funds
Converting and holding currencies
Rollover fees
It is in the buying and selling of currencies that brokers make the majority of their money. They make this money in something known as the spread, or the difference between the asking and bidding price of the currency pair. The ask is the price a retail Forex trader would pay for a position. The bid price refers to the amount that an investor could then sell the position at.
The smallest unit of measure in Forex trading is known as a pip and it is equal to .0001 (except for the Japanese Yen, which is .01). The difference between the ask and bid price is...
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