A Dialogue with Tickmill: Hidden Costs in Forex Trading

Johnny：

The spread is typically the first cost that traders look at before trading. However, many inexperienced traders often overlook other important costs and fees that can significantly impact their trading.

I’ll briefly outline these costs and explain Tickmill's stance on each:

1) Spread

• The spread is the difference between the bid and ask prices of a product. The smaller the spread, the lower the cost.

• At Tickmill, we work hard to achieve and maintain the lowest spreads in the market.

• Based on our market analysis and ongoing monitoring by independent third-party providers, our spreads on major forex pairs, gold, and key indices rank us among the top three suppliers worldwide.

2) Trading Commission

• Trading commissions are fees deducted from your account when you open a position. Commissions are usually charged per "million" or "lot" traded. It's important to note that brokers promoting very low or zero spreads often charge commissions.

• Inexperienced clients often overlook commission costs, as commissions are not immediately deducted from their account balance. This system allows some brokers to advertise seemingly low spreads while charging high commissions.

• Therefore, our commissions are among the lowest in the industry. When you consider both spreads and commissions, we may be the lowest-cost provider in the retail forex market.

3) Currency Conversion

• Trading in markets settled in currencies different from your account's base currency can incur currency conversion fees. For example, if your account base currency is USD and you trade USD/CAD, your profits will automatically convert to USD before being credited to your account. Most brokers charge a percentage fee for such conversions, usually between 0.5% to 1%. This is a cost many overlook, but it can add up, especially if you trade products settled in currencies different from your account's base currency.

• At Tickmill, we do not charge any currency conversion fees; your profits are converted at the spot exchange rate.

   

4) Rollovers and Overnight Interest

• Rollover, also known as overnight interest, refers to closing an open position today and opening the same position for the next day to reflect the interest rate difference between two currencies. If you hold a trading position for a long time, you should pay close attention to rollover costs.

• Overnight interest costs are another significant cost usually associated with rollover fees. The "inventory fees" you see on CFD products in your account are typically the financing costs. When you trade CFDs with leverage, your broker essentially lends you money to open positions you couldn't with your own funds. Brokers charge a small fee to cover the cost of the funds you effectively borrow.

• At Tickmill, we regularly review our overnight interest rates and adjust them according to current market and industry conditions. Like spreads, we leverage our relationships with major liquidity providers to get the best rates. Any positive rate adjustments are passed on to our customers.

   

5) Idle Fees

• Many brokers charge inactivity fees to your inactive account if you don't trade for a period. Brokers set these fees without specific standards. However, at Tickmill, we do not enforce account inactivity fees.

   

6) Withdrawal Fees

• Withdrawal costs are also an important consideration when trading in the forex market. Most brokers charge withdrawal fees to transfer your profits from your trading account to your personal bank account. They do this either to cover payment processing fees or to deter customers from withdrawing funds.

• Did you know... Tickmill also does not charge withdrawal fees.
  
  

 7) Slippage and Trade Rejections
Finally, there are some indirect costs that customers may incur and need to be aware of, such as slippage and trade rejections.

Johnny：

Simply put, slippage is the difference between the price you see on the screen before placing a trade and the price at which your trade is executed. When you click the "Buy" or "Sell" button on your platform, you are placing a market order with your broker. The broker will do its best to get you the best price in the market, but that doesn't always mean you'll get the price you saw on your screen.

Johnny：Slippage most commonly occurs due to an imbalance between buyers and sellers.

Johnny：This imbalance usually occurs during periods of low liquidity, such as market openings, rollovers, holiday trading sessions, or during significant financial announcements, unexpected news, major economic events, or when the market is experiencing sharp volatility.

It is worth mentioning that trade size plays a crucial role in determining whether customers can execute at the price they see on the platform or experience slippage. Most platforms in the retail forex market allow traders to see the top of the book (ToB) prices. The liquidity in the order book may not always be sufficient to meet large orders; such orders will sweep through the liquidity order book and execute at the VWAP (Volume-Weighted Average Price) based on available liquidity. This is why it's important to trade with brokers with solid liquidity relationships with major liquidity providers.

In summary, slippage is another indirect cost that traders should keep in mind. The same goes for trade rejections; a trade rejection represents an opportunity cost of missing out. Although it's hard to quantify compared to slippage, it's something you should monitor closely. After all, what’s the point of a broker offering highly competitive spreads if they can’t deliver on them?

Moreover, Tickmill has maintained an excellent execution quality record. For example, EUR/USD is the most traded forex pair, according to the latest statistics from Tickmill Europe:

• Execution Rate: 99.99%

• Rejection Rate: 0.01%

Slippage Statistics:

• Quoted/No Slippage: 50%

• Positive Slippage: 23% (Average +0.20 pips)

• Negative Slippage: 27% (Average -0.24 pips)