High Volume Traders & Tiered Volume Structure


Huge profits are enticing, but when it comes to Forex trading, bigger isn’t always better. In fact, for high volume traders, the opposite is often true. That’s because high volume traders, those individuals trading anywhere starting from $100 million to $300,000 million or more a month, are rarely able to leverage their trading volume to receive more competitive pricing.

Usually, when traders first start out, they sign up with a retail broker and pay the standard fees. As their volume of trades increases, a trader may start hunting around for a better deal. More often than not, they come up empty. Instead of being rewarded for assuming more risk and committing more resources, high volume traders end up seeing their commission rates rise along with their trading numbers.

Breaking It All Down

Yards, tiers, lots…it all sounds like different ways to measure trades, and in a way, that’s true. A yard in the trading world refers to one-billion and is used as a concise way of naming a figure that could be confused with “million.” For example, if a trader purchases $1 billion U.S. dollars, they could refer to that purchase as “buying a yard of dollars.” A lot, on the other hand, defines the number of currency units bought or sold. In general, a standard size for a lot is 100,000 units of currency, though now mini, micro, and nano lot sizes also exist (10,000, 1,000, and 100 units).

In forex trading, tiers can refer to many different actions and products: from the types of trades (retail vs. wholesale) to the level of trading volume. Tiered pricing for stocks, ETFs (Exchange Traded Products, or ETPs) and warrants usually refers to a system by which broker commission decreases depending on the volume of trade. Different levels of tiers will trigger different commission rates and possibly result in a rebate at the end of the trading cycle.

So what does this all mean? Basically, depending on how many lots or yards you purchase, in a tiered rate system, your commission will decrease as the volume increases. For high volume traders, trading lots of ten or more can be quite common, and the purchase of a yard of currency can put you in the highest trading tiers.

The Cost of the Trade

Trading platforms, tools, current pairs, leverage maximums, and customer service are all key metrics essential to selecting a forex broker. But for many brokers, cost remains the main differentiator. Unfortunately, cost can be difficult to quantify, especially when brokerages hide their charges in complicated bid-ask schemes or complex pricing models.

Tier-Rate Accounts

For forex trading, tiered-rate accounts are used to determine the rate of commission. For example, a client may pay a commission rate of $50 per trade up to ten lots. Once the number of lots surpasses 10, the commission rate goes down. Most forex brokers do not offer tiered volume structures and those that do tend to lack any automation of the volume rebate incentive. In fact, the brokers who promise tiered-rate accounts usually fail to deliver, so a client increases the volume of their trading without reaping any benefit.

Many brokers simply charge commission, with fees charged per trade or group of trades. Others earn money through the bid-ask spread, which may seem like a better alternative but, more often than not, simply results in fees being rolled into the spread.

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