What is a spread?
What's a spread fee?
Alright, so, every time you make a trade, on any exchange - this happens on all the
exchanges, it happens on Etoro too because it's an exchange.
When you buy something, you pay a spread fee, okay.
So, this is how, part of how these people make their money - how Etoro makes its money.
So what is it?
Alright, so let's say I go to...
I'm going to go to a virtual portfolio because all my money's tied up...
I'll show you on the virtual.
So i go to 'trade markets' and let's say I go, I'm looking for Apple.
I want to buy Apple, alright.
So here's Apple, so at the moment we can see the price of Apple is 145.44 - the markets
have just opened.
So, 145.44 - that's the price that everyone sees, you know, that's the actual price.
Let's say I go to trade it, so I click the 'trade' button and here we've got 'Sell',
and we've got 'Buy' at the top.
I'm on 'Buy'.
If I Buy it, it's at 145.62 ... 145.71 alright.
The actual price .55 O.K, wait, alright.
So .63, .75 - see that difference?
So, the spread fee is the difference between the price that it's actually at on the market,
and how much I have to buy it for from Etoro.
So, it costs 145.60, and I buy it for 145.74 ... That little 14 pips, it's 14 little points,
they are the money that Etoro takes, they're the spread fee it takes when I open this trade.
So when you open a trade on Etoro, you'll notice that you buy a stock, and the second
you buy it, you're already losing money, you're losing like a little bit.
It depends what you buy and how much you buy ... Because it works as a percentage.
But you're already losing money, so that's because of the spread fee.
The second you open your new trade, this happens when you 'buy' or when you 'sell' by the way.
So when I sell, look, the Buy price, the buy price is there...
Watch when I click Sell.
Boom, see it change?
Buy
Sell
Buy
Sell
So here, we're not talking about selling like you close a trade, let's say you have Apple
open, and you've been trading for a while and you want to take your profits and sell
it, that's called "Closing a trade", okay...
This version of 'sell' is different.
This is when you want to make money betting that the stock will go down, it's called a
"short" - as short position.
So that's what we mean here by "Selling".
Not closing a trade but actually selling.
So, I buy it, I have to pay that much, I want to sell it - I'm betting money that it will
go down and I'll make money as it goes down - I pay a different price - it happens both
ways.
No matter which way you open a trade, if you're on the Buy side or the Sell side, they're
going to charge you this little bit, amount of money and when you open your trade, when
you say open trade, you click on 'open trade'.
Like, I'll do it now, I'll buy Apple - I'm going to buy just $100 worth of Apple, and
I'm going to do it with no leverage alright, so I open that trade - let's go to my portfolio,
let's find Apple.
Okay, "buy Apple opened - see I'm -7, it's a little bit , that's the spread fee.
Always happens.
Every trade, they charge a spread fee, that's how they make money.
So, how do we find out what these spread fees are?
So, let's go to, it's up here, 'fees'.
So you can look and you can find out all the fees.
The spreads and fees on currencies, indices, commodities, stocks, let's find Apple's...
So here we are, I've gone to 'stocks' - minimal spread is 8 pips.
Okay, a 'pip' is the smallest amount a market can move.
Okay.
'Percentage Index Point' or something - I can't remember what Pip stands for, it's the
smallest amount it can move.
So, it's different, look - Alphabet - 27 pips is the spread.
Here, Amazon, 58, thanks Amazon, or thanks Etoro.
But every time you open a trade, you're gonna get charged these fees.
It happens with all the exchanges, Etoro's are actually quite high, but there we are...
So, that's what a spread fee is.
And they change, they all change.
A quick thing, I forgot to say...
How do these spreads affect how you trade?
Alright, so let's say you're manually trading - you haven't done the sensible thing and
just copy traded someone who's a genius, you've decided to manually trade yourself.
So, for instance, I used to try and do day trading - you don't want to try and do day
trading because it's been taken over by computerised algorithms, realistically.
A human can trade you know, once every minute, or something, or 10 seconds.
The algorithms which are these little computer programs written by the nasty big banks or
whatever, they can make 14, / 15,000 trades a second, so day trading for the last 7 years
has been kind of impossible.
So...
I was trying to day trade though, and also swing trade...
So generally when a stock moves, it doesn't move in a straight line upwards - yaaaaaaaay.
It'll go like this ... okay.
So I used to try and buy the stock, and when it gets there, I think "It's gonna go down!"
so I sell it, and then I open a "Sell order" so I can make money as it's going down.
Then I close that trade as well, and I buy again, so I tried to make money on all
of these as it goes up and down.
The problem is that every time I opened a trade, I'd notice that you have the spread fee.
So let's say it goes from here to here - the price...
I buy it here, and I'm gonna sell it there...
This bit is all me making back the spread fee, to give to Etoro.
That little bit is mine.
Didn't work out.
It's a little bit frightening doing that, so that's something you have to notice about
spread fees - when you open a trade you're gonna be charged them.
Obviously it's in Etoro's interest that we all make lots and lots of short trades because
then they make lots and lots of spread fees.
But short trading doesn't work so much - day trading doesn't work really, it's nearly impossible
for the last 7 years because of these algorithms.
So we've moved more and more towards longer term - medium term and long term trades, you
know, a few weeks even is classed as longer term, or months or years or whatever.
But there are these spread fees, there's also overnight fees which I'll tell you about later,
they're different.