Trading Fees

[Wictorian]

Is there a way to trade without fees?

[GDRRiley]

trade what?

 

[Wictorian]

13 minutes ago, GDRRiley said:

trade what?

 

crypto 

[Chionele]

Practically no, since this is how exchanges make their cut.

[Wictorian]

1 hour ago, Chionele said:

Practically no, since this is how exchanges make their cut.

I am talking about the fees that are paid ro broker firms btw. how do they do it anyways?

[straight_stewie]

23 minutes ago, Wictorian said:

I am talking about the fees that are paid ro broker firms btw. how do they do it anyways?

Usually it's the same way that foreign currency exchanges make profit: Inside the Bid/Ask spread

 

Bid/Ask is kind of a weird term. It's more recognizable what it means when it's written as "SellPrice/BuyPrice".

So, as an abstract example, let's say that currency is currently trading at value x. The exchange will publish a bid/ask spread of the form x-y/x+y where y is half the exchanges profit per unit of currency.

Or, in other words, a buyer buys currency at higher than market rate, and a seller sells currency at a lower than market rate. The difference between the two is the exchanges/brokers profit.

Bid/Ask spreads will differ by exchange, which is where currency arbitrage comes from.

[Chionele]

42 minutes ago, Wictorian said:

I am talking about the fees that are paid ro broker firms btw. how do they do it anyways?

Same difference, really, and like said they use spreads to cover their cut.

[Wictorian]

2 hours ago, straight_stewie said:

Usually it's the same way that foreign currency exchanges make profit: Inside the Bid/Ask spread

 

Bid/Ask is kind of a weird term. It's more recognizable what it means when it's written as "SellPrice/BuyPrice".

So, as an abstract example, let's say that currency is currently trading at value x. The exchange will publish a bid/ask spread of the form x-y/x+y where y is half the exchanges profit per unit of currency.

Or, in other words, a buyer buys currency at higher than market rate, and a seller sells currency at a lower than market rate. The difference between the two is the exchanges/brokers profit.

Bid/Ask spreads will differ by exchange, which is where currency arbitrage comes from.

Then I don't think its a big deal. No matter how small my profit is, I will never pay more fees than my actual profit, right?

[WkdPaul]

* thread moved to the appropriate section *

[straight_stewie]

7 hours ago, Wictorian said:

Then I don't think its a big deal. No matter how small my profit is, I will never pay more fees than my actual profit, right?

Ostensibly, their profit is hidden from you. When you go to buy, they quote you the ask price. When you go to sell, they quote you the bid price. If you are profitable at those prices, then you are profitable at those prices.

When learning about bid/ask spreads is also a good time to learn about bid-ask arbitrage:

The cool thing about crypto currency is that cross exchange bid-ask spread arbitrage is easily available to retail investors because of the way wallets work. This is not the case for retail forex traders, as you need direct access to trading desks to pull off true cross exchange arbitrage with "paper" currencies.

 

For easy reference, cross exchange bid-ask spread arbitrage, when done correctly, brings immediate profits with little to no risk as you carry no open positions. Exchanges don't just compete on features, they also compete on prices. So basically you can buy currency on an exchange that's trading lower and sell on an exchange that's trading higher. The difference between the ask price on the buying exchange and the bid price on the selling exchange is your profit. You conduct the trade simultaneously (or nearly simultaneously if you don't have a margin account on the selling exchange), and immediately pocket the difference between the two as profit, without having to carry any currency (or without having to carry any currency for more than a few seconds if you don't have margin/aren't automated).