All operations in the financial markets have very specific costs. Among the latter, we can mention custody and brokerage fees. In this article, we will analyse these costs and show you how to calculate them and incorporate them into your investment strategy. We will also present some methods that will enable you to limit them as much as possible.

How to define brokerage fees?

These are charges imposed by organisations, which act as a link between the trader and the companies. They are normally calculated in relation to the amount spent to buy the share and amount to a rate of 0.5% in Britain.

That said, in some cases, we can find a single tax system, which includes special rates for foreign shares.

The brokerage fee billing system?

Correctly calculating brokerage fees will allow you to generate even more profit.

Intermediation fees are calculated on the basis of the portfolio management mandates. In addition, it is taken over by an expert, who is remunerated in return, by means of a levy corresponding to an intermediation commission. You, as a home-based trader, will pay these fees directly, with each order placed on the stock exchange. Please also remember that this applies to purchases as well as to resales. In both cases, the intermediary is entitled to your remuneration.

Of course, it is according to a specific formula that these fees will be deducted from your earnings. As for the French stock exchange markets, they amount to a rate of plus or minus 1% of the amount paid for the purchase or the amount received for the sale. Moreover, here, online banks and brokers are the delight of traders, as they are the only ones who can limit these charges. Therefore, it is strongly recommended that you open an account with a regulated broker, or an online bank, before continuing with your transactions. This will allow you to make good savings, which can be quite large, in the long term.

How do brokerage fees vary?

As mentioned above, brokerage fees may change depending on the intermediaries you choose. But they can also vary according to the number of operations and the pace at which you carry out your transactions. On the other hand, the tools with which you place your orders can also have an impact on your rates. Therefore, you will have different intermediary rates when you place your orders by email or phone.

On the other hand, brokerage fees are likely to vary according to the markets that host the transactions. For example, in the Spanish markets, these are set at around 1% for each transaction. If you use a market other than Euronext (not to be confused with Eurostoxx ), the fees will be set at an average of 1.50 pounds. In addition, additional costs may be added, such as initial entry or exit charges at the time of resale.

It should be noted, in passing, that these costs are distinguished by their decreasing characteristic. In other words, you can limit them by investing larger amounts. That said, it is not advisable to do so, just to take advantage of this discount. The investment must be well calculated, and if you find yourself in a situation where investing a few more pounds will allow you to enjoy a more interesting advantage, it is only at this point that you should consider doing so. It should also be remembered that the pricing system only applies to transactions for which settlements are deferred.

Some additional information on these costs:

It is important to remind our readers that brokerage fees are not the only fees that apply when trading on the stock exchange. When trading multiple assets of all types on online trading platforms, you will find that other fees apply as well. The simplest example we can think of is account maintenance fees. All these costs should be included in your calculations, if you want to work under the best conditions and avoid unpleasant surprises. Furthermore, they are also likely to change under the same conditions as the bank and the broker.

To better compare brokerage rates:

Naturally, all traders would like to benefit from the lowest brokerage fees. For this reason, opening an account at an online bank or with a broker is the best thing you can do. In fact, this will allow you to limit your expenses and thus generate greater profits.

However, finding the broker who offers the most competitive brokerage rates is not an easy task. This is mainly due to the fact that these vary according to various conditions.

Therefore, instead of starting research, you can limit your criteria to those you need most. This way, you will not only find the best offer, but the one that is right for you. This will help you reduce the number of intermediaries among those you will research.

On the other hand, limited fees should not be the only motivator that pushes you to register with a certain broker, for example. We must not forget that intermediaries seek to attract new clients at all costs. In such a competitive environment, better offers will undoubtedly emerge in the future. In addition, it is important to check whether these benefits are not promotional, in which case you should compare them with the base costs.

Is it possible to cancel these fees?

Avoiding brokerage fees by using CFDs can save you significant amounts of money.

Online banks, as well as brokers, charge brokerage fees to their clients when they conduct transactions. However, what they don’t tell you is that there is a way that you can avoid paying them. In fact, to avoid these fees, you can simply trade through CFDs.

Most trading platforms offer their clients the benefit of these very specific trading tools. In fact, they are very useful as they allow you to position yourself in the market at any time. Moreover, thanks to these contracts, you can also invest both upwards and downwards. The great thing about CFDs is that they have literally zero rates. The only charges that can be deducted from the profits of traders using CFDs are limited to the spreads . As you know, these are calculated automatically and this makes the trader’s job significantly easier. That said, it is not always recommended to use these contracts as they carry significant risk due to their very high leverage.

CFD brokers also impose brokerage fees, but these are in a completely different way. In this context, these charges are called spreads. They correspond to the transaction fees that are incurred at the beginning and end of the exchange.

What are the differentials?

To define a spread, we can say that it is simply the difference that remains between two specific prices, at the time of purchase and sale. When buying and selling an asset from a broker, the prices shown are the price of the asset in question, plus the spread. Since this is a charge that cannot be avoided, it is more convenient to include it in this way. In other words, spreads are the margins imposed by brokers during transactions, and more specifically at the opening as well as the closing of the transaction.

These deductions represent the remuneration of the brokers. For this reason, comparing the spreads of different brokers can help you to be successful as a trader. Of course, it is obvious that spreads are only important to consider when working in the short term. If you invest in the long term, they will only have a virtually negligible impact.

That said, you can also find differentials that apply in exchange offices. This explains the difference between the purchase and sale value of currency. This difference corresponds, in fact, to the remuneration imposed by the office in exchange for its services.