Hi guys, if I use, say, 4:1 leverage and the spread is normally 2 pips for the EUR/USD, does that mean I pay 8 pips? or do I still only pay 2 pips? Thanks
If you are only paying spread and zero (or fixed) commissions then your commission cant ever increase. However if you consider the spread to be a hidden commission, then yes the dollar amount of this hidden commission will go up with leverage. Let say you make 1000 trades. You will have paid 2000 pips in spread over those 1000 trades, regardless of the amount of leverage used, but: If were betting $1 per pip, then you paid $2000 in spread If you were betting $10 per pip, then you paid $20,000 in spread. If you were betting $100 per pip, then you paid $200,000 in spread.
good question albeit awkwardly phrased leverage, in a traditional sense, magnifies transaction costs as a % of your stake that’s an often overlooked impact of gearing
It is the same percent, 2 pips spread just on a larger position size. Leverage magnifies win or lose. Not cost in "commission-free" FX trading and the spread is the spread.
Is leverage same as margin account? If yes, I understand what is said above that commissions have nothing to do with using margin as overnight margin interest applies separately. My question for this whole thread is, why has everyone else been talking about spread and pips when it comes to leverage? What are they saying? seems they are talking about something important too but I am not sure what.
I have not experienced that. I used various spread with my previous broker, the spread doe snot change with with leverage. Now I use 1:500 with Tenkofx most times. Spread those not change whether I go lower or higher. Maybe this has to do with some kind of brokers.