You will have to pay interest on a trade for the length of time its in play. If you have a trade with 100,000 US dollars and another 100,000 in Euros, depending on what way the trade is going, you will have to pay the difference for the interest rate differential. Seems no one mentions this. A sell with the eurusd carries a negative differential so you pay interest. A buy has you receiving interest. For a handy chart that will give you an idea of how much your interest charges will be go here. Remember, you pay on the money you leveraged, not the margin you put up. Although you may have only put up a few thousand in margin, you are on the hook for the interest of the full trade amount.
Did you know that a trader who enters the market four times a day with a 10K trading account actually has a yearly trading volume of two billion dollars? That's right. The trades add up. Here is a neat tool to calculate how much your spread costs are, but I use it to see just how wild and crazy it actually is to trade like a silly man. It sounds good to tell people you do a volume of five or ten billion dollars but when you look at it rationally, you are paying out a hefty sum of your money to brokers in exchange fees, interest rate differentials and spread costs.
Spreads are computed on what that particular Forex broker is offering as the official price at that moment in time. Nice to have a broker with tight spreads but it doesn't mean squat if the broker is always several pips off from a good price. In Forex, there is no official foreign exchange price so it is what they say it is. If you don't like the prices they offer on their platform then don't do the deal. On the surface and in the marketing material its nice to find a broker who will give you a tiny spread between ask and bid but the problem is that almost every broker out there has a difference reference point. Six brokers will give you six different prices. That's just the way it is in Forex since there is no official exchange.
Who is to say what the real price is? What does the real price mean? There is no one official price. You are completely at the mercy of your broker to tell you what they think it is. This is just stuff you should be aware of. I hate to be the bearer of bad news but this isn't necessarily bad news. Just because you didn't think of them before cashing out some profit for the first time, or your guru didn't have the guts to talk about, doesn't mean it doesn't happen. Just be prepared. (As I mentioned earlier, just wait until you see the difference between what your broker charges and what your local country bank will recharge.) Its like the statement that demo feeds match real trading feeds. Maybe they do in some situations, but only a beginner or magic system back tester would think you can get filled at the price shown every time with a live account.
Keep in mind that the prices you see on the chart are not necessarily the same price your broker platform is showing. If you are using a different set of charts than the exact one the broker tells you to use, there are usually discrepancies in prices. Its quite noticeable when the market is volatile. If you use a demo account, you wouldn't notice it but those with a live account see it almost instantly. Different brokers display different prices. When there isn't much going on in the market, they all pretty well line up. But when you are in the heat of the action using a live money account, the difference becomes painfully obvious if you aren't forewarned.
Read the fine print of your broker agreement. The first time my wife and I actually sat down and read the fine print I almost threw up. Wow. I had been so excited to begin my Forex career I didn't give a passing thought to what I was actually and legally liable for. This is the most cut throat business on the planet and reading the broker agreement will certainly remind you of it. Unless you happen to be a person with poor credit and nothing to lose, you must form a special company if you are planning on going into trading in any serious type way. Open your live account using the name of the special entity you created. Different countries and situations vary so you should contact your attorney for advice before placing your home and bank account on the line. As you will read, the broker doesn't have to honor your stops and you are liable for the trade if you can't get out in time. You are not obligated only to the amount of margin or the size of your trading account. Big losses can result if you are not prepared. The market has been known to go crazy and you could be held accountable for a several hundred pip loss. If they can't get you out in time, they go after your bank or credit card. Play it safe and open your trading account in a limited liability company of some type.
Spreads vary greatly depending on what pair you choose to trade. Some pairs have huge spreads. Check your brokers price spreads carefully since you may be at a distinct disadvantage on the currency exchange after thinking you made X amount of pips profit. Do some math. It's just basic but it has to be done or you really can't tell if you made money on a certain trade or not. Before you trade any combination of currencies make sure you know the spread and the price to convert your trading account currency to each of them.
An intraday trader is in and out within a few hours. If you are using high leverage you are an intraday trader.
Think of leverage in terms of percentage for your trading account. 100 to 1 leverage means one dollar is parlayed to become a hundred. If the currency moves a penny and your trade pays out $1.00 a pip that's an astounding 100 times your money in a few hours. Big time money people don't think in terms of dollars and cents like small traders. They are all about percentage of gains on their trading account. Try to get used to thinking in those terms. If a pro can increase their account by a tiny percentage each day they are happy. Its all about return on investment in its many forms. Remember, a pro has to win over and over day after day and month after month.
How many people have hundred thousand dollar trading accounts yet use 100 to 1 leverage with a grand for margin? (Brokers set it up by default on demos) Come on, if you are going to make a trade for ten grand worth of Euros, and you have a hundred grand sitting in your account wouldn't it be considered silly to be paying leverage to your broker? Use 10 to 1 instead. Percentage wise, you can take ten times the beating in the market before equalling the same loss ( percentage wise) as a 100 to 1 leverage player.