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Day trading often involves trading with high volumes and a large number of positions per day. This makes it all the more important to find out about the fees and costs. Choose a favourable broker and save money.
These fees can be incurred:
Spread: Difference between buy and sell price. The spread depends on the market situation or the broker. Many brokers collect the trading fees through an additional spread. In plain language this means that you get a worse entry of a few points into the market.
Commission: This is a fixed trading fee. If the broker does not collect the money through the spread, a commission is charged per opened position. The commission is usually paid when buying and selling the position.
Fees for the software: In most cases, the broker pays the fees for the software. Some special software (e.g. for futures contracts) must be rented or purchased.
Account management fees for inactivity: From my experience and countless provider tests, there is no general account management fee. However, some brokers do charge a fee for inactivity of 3 months or more. This can be found in the general terms and conditions of the provider.
Costs with the payouts: Again, this is a rarity. Some brokers charge a fee for withdrawing client funds (very few providers).
Day Trading can cause high trading fees
In contrast to long-term investments, day trading causes higher fees for trading. This is due to the fact that the day trader trades only very small movements in the market and therefore uses a higher trading volume. Consequently, the trading fees accumulate with the broker.
In addition, in most cases many trades are opened during the day. In general, in the small time units things happen very fast and the daytrader opens several trades a day. In summary, the trading fees for day trading are the only costs that probably put pressure on the wallet. The lower these trading costs are, the greater the profit will be in the end. Therefore choose a favorable broker.
- High trading volume generates higher fees
- A daytrader often opens many different positions per day
- Be sure to pay attention to the costs
The trading costs can be viewed publicly at the broker. The broker is obliged by corresponding regulations to provide a transparent cost structure. In the event of violations, the license will be revoked. For a daytrader it is difficult to estimate the trading costs, because sometimes unforeseen market situations increase the trading frequency.
At the latest on the statement of the trading account you will see the commissions paid. The fees are unavoidable, but you can keep them as small as possible with a low priced provider.
Example: It pays to save
Projected over the year, you can save several thousand euros with a low-cost broker. In the following example I would like to show you a small calculation. By paying low fees you can additionally gain one percent in performance:
Day trading in EUR/USD with a position size of 1 lot (100,000) and a paid commission of about €10 per trade. The trader opens on average 5 trades per day. He trades on 200 days a year. This compares to a provider where he would only pay 6€ per 1 lot.
Provider 1: 5 x 200 x 10€ = 10.000€ trading fees
Provider 2: 5 x 200 x 6€ = 6.000€ Trading fees
A simple change of provider would save the trader a total of 4.000€ per year! Many daytraders have an even higher trading volume, which means the savings would be even higher!
How does the broker earn money? – He always wins
As mentioned above, the broker earns his money through the trading fees that a trader pays. The infrastructure must be financed by this. This includes customer support, regulatory costs, software costs, licenses and also assumption of the costs for transactions of customer funds.
A broker can earn money with almost no risk. In my opinion, it is a money printing machine, because the broker only has to cover his own costs and the profit can be multiplied with a large customer base. Quite often the broker invests a lot of money in well-trained staff and additional service.
A trader can often choose between several account types. The requirements for these accounts can vary and should be checked by the trader beforehand. In most cases, better conditions are offered for a higher trading volume (higher deposit). In total there are 2 known fee models, which I will now introduce to you.
Model 1: Commissions in day trading
This model is in many cases cheaper than the second model. The broker offers you real market spreads from various liquidity providers. These can be different banks or other large brokers. Your positions are executed here at the next best real market price. The provider now charges a fixed fee per trade. This fee is calculated at order opening and closing.
Model 2: Spread in day trading
From my experience, this fee model is in many cases more expensive than the commission model. This time the broker does not charge a commission but an additional spread. The broker finances himself through this additional spread. This spread is added to the real market spread and can vary. The position is therefore first in the minus after opening. The spread then reappears when the position is closed.
“THE DIFFERENCE BETWEEN THE BUY AND SELL PRICE. THE BROKER EXECUTES THEM AT WORSE PRICES, SO THE SPREAD HAS TO BE EARNED FIRST TO LAND IN PROFIT.”
Day Trading costs: Overall Winner
From many comparisons and experiences on the markets, the overall winner for me is GBE (trading platform picture below). In the following key points, I will give you an overview of the cost structure. The provider is the cheapest in each area and he gives a very good overall package. I will then show you other providers who are very well suited for day trading.
The provider can beat other competitors in many points. In addition, the broker is trying to keep his fees down. Often there are interesting updates.
The fees at a glance:
- No account management fees
- No software fees
- 2 account models: spread from 1.0 pips or from 0.0 pips and 3€ commission for opening and closing a position
- Indices below 1 point spread (Dax below 1 point spread)
- No fees for deposit and withdrawal
In addition, the broker is regulated in Germany by BaFin and also has a customer centre in Hamburd. GBE is for me a clear overall winner in fee comparison and service.
Other inexpensive providers in comparison
In the table below you can see a comparison of the best brokers for day trading in my opinion. They were tested extensively and can differentiate you from other providers by a clear cost structure. BDSwiss is similar to GBE a very good overall winner. The differences between these brokers are minimal. With BDSwiss you can even trade with a high leverage of 1:500.
Tip: Extremely cheap Forex trading with Tickmill
Tickmill is the cheapest Forex provider worldwide. A Pro Account can be opened for as little as 100€ and you pay a maximum of 2€ per 1 lot traded on commission from 0.0 pips spread. This is an unbeatable offer and should be considered by every Forex daytrader. For larger deposits there is even a VIP account where you pay only 1€ per traded 1 lot.
- To the test report about Tickmill
Conclusion: Day trading does not have to be expensive
Thanks to electronic trading and online trading, the fees in day trading have fallen dramatically. A few years ago there were still very high costs in stock exchange trading. Due to new technologies and growing competition, trading fees will continue to fall. In my experience, trading fees only make up a very small part of the costs.
Nevertheless, you should definitely look for a cheap provider in day trading. The above calculation example has shown that you can easily save several thousand Euros per year. This money should really not be given away. In addition to the favorable fees, the broker should also be checked for other characteristics.
Characteristics of a good broker:
- Regulation and license
- Free demo account
- Good and professional support
- Fast execution
Since the trading volume and the trading frequency in day trading is very high in contrast to other forms of investment, the trading fees will also be higher.
On this page I have shown you optimally what daytrading costs and which fees and costs can arise. Knowledge is in the trading makes and one should have informed oneself before in detail. Thus it comes to no unpleasant surprises.
Good luck in trading!
See my other articles about day trading:
- 12 best Day Trading Indicators – Technical Chart Analysis
- Day Trading Broker Comparison & test
- Day Trading Demo Account Comparison
- Day Trading minimum deposit – Starting Capial
- How To Prepare For The Trading Day In A Sensible Way?
- Learn Day Trading – Full Tutorial for beginners
- My Experience Report About 8 Years Of Day Trading
- The best Markets for Day Trading
- What does Day Trading Cost? – Fees explained
- What is Day Trading?