It’s important to trade cheap. Don’t forget that the fees can really take a bite out of your earnings. In this article we discuss where and how you can trade the cheapest.
Traditional versus modern trading
Most people still trade traditionally, mostly in stocks. A downside of traditional trading is the fact that you pay a fixed rate per trade. This is cheap when you deal with large investments, but with smaller orders this can get costly. And thus it can be very disappointing.
With modern trading you can trade cheaper and with smaller amounts using so-called CFDs. If you are buying a few stocks, then the costs are low. But if you are buying many stocks, then the costs will be higher. In this article we test several brokers based on a small order so you can see which broker is the cheapest.
Test: where can you trade the cheapest?
To answer this question, we buy 30 shares of Philips. One share of Philips costs about 22 pounds. Per broker we calculate the fees to determine where it is cheapest to trade:
- Etoro: £1.80 per share total fees are £0
- Markets.com: 6 cents per share, total cost is £1.80
- Saxo Bank: 0.09 percent and a minimum of 5 pounds, total costs are £5.60
- Lynx: 0.09 percent and a minimum of 6 pounds, total costs are £6.00
- Binckbank: £6.50 + 0.1%, total costs are £7.16
- Alex: £7.50 + 0.15%, total costs are £8.50
eToro clearly wins this race. With no commissions you can safe a lot of money by buying your shares using the etoro trading platform.
If you want to trade as cheaply as possible, it’s clear which broker you need. You can try out trading at eToro by using its temporary demo of 100.000 dollars.
Is eToro always one of the cheapest brokers?
Because there is no commission for placing an order, we can state that Markets.com will always be the cheapest. When you look at the percentages, it’s only 0.18 percent fees per share in the above example. Saxo Bank, Lynx, BinckBank and Alex all offer lower percentages but have a minimum fee. This makes them far more expensive.
Only when the fees go above 5 pounds will Markets.com no longer be the cheapest option. Thus, if you want to buy 125 shares of Philips with a total value of 2750 pounds, then the cheapest broker will be number two on the list, Saxo Bank.
Tip: verify large amounts
When you start to trade with amounts over 1000 pounds, then it always pays to check if Markets.com is cheaper than another broker. First you calculate the total cost of an order with Markets.com. If the fees go over 5 pounds, then you can switch the trade over to a different broker such as Saxo Bank, where the fees will be lower in this example.
For most people, it would be most interesting to trade with Markets.com. You can open new positions very cheaply and you can make a lot of money with a lot of tiny orders in a short amount of time. That certainly has its benefits.
You can definitely trade cheaply, even with small amounts!