I first started trading the markets about 10 years ago after a mate of mine in The City left his graduate job after 3 years at a hedge fund and started trading for himself. I have always been good with numbers and assessing risk, but the intrigue of the money he was making got the better of me. After a few months sat next to him in his trading room at home, I opened my first financial spread betting account. I was puffed in by the lure of a trading course and a free charting package for the first month. I solely traded FX pairs – predominantly GBPUSD and USDJPY.
Foolishly back then I didn’t realise how important the spread (difference between the bid and offer price) had on my overall p/l and ultimately the success of my trading career. I am a day trader so never hold positions overnight – I am more like a scalper, in and out of trades for a few seconds or even holding positions for an hour, but never overnight. I would be making at least 50 trades a day on some days. It was only after a trading seminar hosted by Spread Angel that I realised just how important the spread made to my performance. It was a whole new world out there as I suddenly became aware of at least 10 other brokers who offered the same service as I was getting, but more importantly access to trading the same products so much cheaper.
It made total sense – I used to use Skyscanner to save myself £20 on flights for the family, but now I was using a tool that was saving me £50 a day in my trading figures! Incredible. The impact it had on my numbers was amazing…..I suddenly went from a trader making £2k a month to a serious trader making more than £4.5k a month purely down to changing brokers. My original broker was charging me approximately 2 points on GBPUSD, but when swapping I was not only being charged 1.
Here are a few stats to run your eyes over:
A poll carried out with 100 retail traders…
- 5% knew why a ‘funding charge’ was applied to a position held overnight.
- 30% knew the funding charge could be a credit and not a debit.
- 35% of clients knew what spread they were charged on the market they traded the most.
- 40% traders have just one trading account
Trading courses supposedly teach you how to trade, but none of them mention the importance of the spread you pay and the costs incurred of overnight funding.
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