Discovering the Truth: Is OANDA Really a Free Broker?

In the world of forex trading, brokers play a crucial role in facilitating the buying and selling of currency pairs. One of the most popular and well-known brokers out there is OANDA. But amidst the variety of options, one question that pops up quite often is whether OANDA is a free broker.

Understanding ‘free’ in forex trading

Before diving into whether or not OANDA is a free broker, it’s important to understand what ‘free’ means in the context of forex trading. When someone says a broker is ‘free’, it usually indicates that the broker doesn’t charge any commission or fees for the trades executed on their platform. However, this doesn’t mean that the broker is entirely free as there may be other hidden charges or costs.

The cost structure of OANDA

Now, coming back to the question at hand, is OANDA a free broker? Well, the answer is both yes and no. Confused? Let me explain. OANDA is primarily known for its competitive spreads, which is the difference between the buy and sell price of a currency pair. But to cover their operational costs, OANDA includes a small spread markup on the traders’ buy and sell prices. This markup is the amount by which the broker increases the spread, and it varies from trade to trade.

Additionally, OANDA charges an overnight financing fee for holding positions overnight in certain currency pairs, also known as a swap fee. The swap fee differs based on the currency pair traded, and the fee can be positive or negative, depending upon the direction of the trade. This swap fee is disclosed upfront to traders, so they are aware of the charges before executing any trade.

Other costs to consider

Aside from the spread markup and swap fees, there are a few other charges to consider when trading with OANDA. If traders execute trades on the MT4 platform, there is an additional commission charged on top of the spread markup. For example, if a trader wants to execute a trade on the EUR/USD pair, they would have to pay a spread markup of 1.4 pips and an additional commission of $5 for every $100,000 traded.

Furthermore, OANDA charges a monthly maintenance fee of $10 inactivity fee if traders don't execute any trades or maintain a balance of less than $20,000 for six consecutive months.

Final thoughts

So, is OANDA a free broker? The answer to this question is not a simple ‘yes’ or ‘no’. While OANDA does charge a spread markup and swap fees, they are transparent with these charges and disclose them upfront to their traders. Additionally, the other charges, such as commissions and maintenance fees, are also disclosed on their website. Ultimately, traders must weigh the costs of using OANDA and decide whether the benefits outweigh the expenses.

• Takeaway: OANDA charges a spread markup and swap fees but discloses them upfront.
• Important: Traders must weigh the costs and benefits before choosing OANDA as a broker.