Page 61 - Module1_Introduction_to_the_Forex_Environment

Module 1 – Lesson 12 – Stocks vs Forex

6. trading cost
A stock trade will cost anywhere from $5 to $30 for an online stock broker and typically up to $150 per trade
for a full-service broker. Futures brokers generally charge between $10 and $30 round turn, this means you
pay between $10 and $30 to enter and exit every trade. Most Forex brokers offer little or no transaction fees,
they are compensated through the bid/ask spread of each currency pair. Typically, these spreads are as little
as 1.5 to 5 pips, depending on the broker and currency being traded. So essentially the only fee associated
with a Forex trade is that you start out being a few pips negative on every trade due to the bid/ask spread.

7. use of leverage
Leverage is another consideration. In the United States, investors generally have access to 2:1 leverage for
stocks. The Forex market offers a substantially higher leverage of up to 50:1, and in parts of the world even
higher leverage is available. Is all this leveraging a good thing? Not necessarily. While it certainly provides the
springboard to build equity with a very small investment - Forex accounts can be opened with as little as $100
- leverage can just as easily destroy a trading account.

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