Always keep An Eye On The Costs When Trading

Always keep An Eye On The Costs When Trading

Spreads and swaps, brokerage fees and custodian fees – even the most talented trader can lose track here. But holistic research is important, especially for daring beginners, in order to build on the success of many others.

So that the leap into the financial world does not become a fall into the unknown and there is no terrible awakening from the dream of trading, this article explains all the lurking costs.

What Are The Costs Of Trading?

Fortunately, traders are not entirely on their own. The diversity of financial service providers, external providers and portals resembles a colorful potpourri of the financial sector. It is advisable to rely on proven and reputable platforms such as eToro.

Costs are incurred, this is unavoidable, but which ones? Whether costs for platforms, commissions to the brokers or simply taxes – many things are not thought of once you find pleasure in trading. Therefore, the following overview should provide an overview of common trading costs.

spread

Spreads, or bid-ask spreads, are the differences between the bid and ask prices. They accrue with every trade, regardless of the success of the trade, because the broker uses spreads to cover his expenses.

Order Fees

Some brokers pass spreads directly to banks, which is why they cannot cover their costs. In such cases, an order fee, or commission, will be charged. Like the spreads, it applies to every trade.

A distinction is made here between variable and fixed order fees, with the variable model being based on the order volume and the fixed fee remaining the same, regardless of the order volume.

Custody And Account Management Fees

These costs are not necessarily incurred. Some banks and financial service providers charge account maintenance or custody fees, while others do not. Comprehensive research is advantageous here, since other criteria may be more important depending on the scope of the trade.

If the fees are charged, they are based on the type and amount of stocks.

Inactivity Fees

Inactivity fees may apply if no positions are opened for a certain period of time. The periods vary; some brokers require it after just a few months, others only after two years. The fee can be up to 50 euros.

Software For Trading

If the supply of course data in real time is of great importance, a complete solution in terms of software should be used. These usually also contain analysis and charting functions. However, the costs amount to up to 70 euros even for occasional use.

The usual trading software can be provided by the broker or external providers, but some features have to be dispensed with here.

Costs For Optional Extensions

If the corresponding features are lost with one of the free versions of the software, they can simply be purchased from a broker or another provider for a fee. Among other things, these extensions can even contain the possibility of supplying course data.

Withdrawal Fees

Fees may also apply to withdrawals. A distinction is made here between percentage and flat-rate costs. Percentage fees are based on the payout amount, while flat-rate payout costs are fixed, i.e. fixed.

Some brokers and financial service providers also offer several free withdrawals, e.g. B. monthly or quarterly.

Accommodation Costs

Likewise, positions held overnight may incur charges. An example are so-called swaps or rollover fees.

A rollover represents an amount based on the interbank interest rate for the underlying asset. If a position is to be transferred to the next day, the corresponding fee is added at midnight.

Withholding Tax

Since traders derive income from capital assets from trading, this is taxed. The withholding tax is 26.38 percent, consisting of a flat tax rate and the solidarity surcharge. There may also be church tax, which varies from state to state.

Also Read: Blockchain Technology Will Change The Financial Economy

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