The hidden costs of trading on FTX: fees can eat into your profits

RAMA38.MY.ID -Although FTX offers the chance to trade with zero commissions, there are other costs you should be aware of when trading FX and CFDs on the platform that can reduce your profits or even wipe them out entirely, so it’s worth knowing what they are and how to avoid them. 

This article provides an overview of these costs and explains how to avoid them while still trading on FTX.

Trading with Leverage

This is the most common way to trade, and you'll have to pay a fee every time you open a position. The fee depends on the type of position that you open, and the leverage amount. 

For example, if you're opening an outright long position with 100x leverage, then you'll pay $2 per contract when you close it. In this case it works out to be a percentage fee as opposed to fixed dollar cost for each trade. 

But what happens when you use less than 100x? You may think that paying a lower fee would be better for your bottom line, but there's more to consider than just trading fees. 

When you use less than 100x leverage, the interest rates are higher. That means in the case of our example above, if we used 50x instead of 100x leverage, we'd end up paying $4 per contract - twice as much! 

It might seem like you're getting off cheap by using less leverage, but in reality, you could actually lose more money. So make sure you take this hidden cost into account before deciding how much leverage to use. 

If you don't want to go through all of the math yourself, some brokers will calculate these fees automatically for you so you don't have to do any calculations at all. 

As always, shop around and compare brokerage services to find one that best meets your needs without overcharging for things like trading fees. 

-Leverage can be a double-edged sword: Lower leverage = Higher interest rate -You could either lose more or win more depending on which broker you choose -If you're not sure what to choose, work with a broker who does automatic calculations for you -Fees aren't the only factor you should look at when choosing a broker ; also consider other important factors such as how easy it is to use their website , customer service, etc. 

Make sure you check reviews from others who have tried them out and see what they had to say about their experience. Another thing to keep in mind is whether or not your chosen brokerage offers free demo accounts . 

With a demo account, you can try trading with different amounts of leverage and see which option works best for you. Lastly, check the hours during which support is available.

Exchange Fees

When you trade a cryptocurrency on an exchange, you typically pay a fee to do so. When trading futures contracts, these fees are called commission or funding. 

The commission for each trade is set by the broker and usually ranges from $0.05 to $1.00 per contract depending on the size of the contract and type of asset being traded. 

Some brokers offer commission-free trades for a small list of cryptocurrencies but this is not yet common practice in the industry. 

For example, if you buy 1 bitcoin at a price of $10k, then sell it after one day at the same price point for profit, then your profit would be $10k - ($10k x .2%) = $4,900. 

However if you were paying 0.2% commission on your trade that would mean that out of every dollar you make only 20 cents is actually yours! If you had no commissions to worry about, your profit would be $10k - (.2%)x($10k)=$9,800. 

In other words, even though the price of bitcoin remained unchanged throughout the transaction, traders who use FTX can enjoy up to four times more profit due solely to their lack of commissions. 

Commission Free Trades FTX offers commission free trading for the following popular assets: Bitcoin (BTC), Ethereum (ETH), Ripple (XRP), Litecoin (LTC), Monero (XMR). 

Note that all cryptoassets are eligible for free trades, as well as all currency pairs listed on Google Finance. Also note that there will always be a minimal charge of $0.01 per contract regardless of the amount invested to cover our upkeep costs. 

So when you compare these extra trading fees with the 4x gain potential, we think it’s clear which solution makes more sense for your investing strategy.

Trading Platform Fees

There are a number of different types of trading platform fees that traders need to be aware of. These include commissions, which are the fee you pay for executing a trade, and spreads, which is the difference between the bid price and the ask price (or what you will get if you sell). 

However, there are other less-known types of expenses that traders should also be aware about when using any type of trading platform - even one like FTX where there's no commission to buy or sell. 

Some platforms charge an annual account maintenance fee, or an inactivity fee for inactive accounts. Additionally, many platforms charge a monthly inactivity fee if you don't make any trades over a 30 day period. 

For example, popular brokerage Charles Schwab charges $1 per month inactivity fees for accounts with less than $10,000 in assets, as well as $25 per month account maintenance fees after 12 months of non-usage. 

TD Ameritrade also charges $25 per month inactivity fees for accounts under $5,000 and require an account balance of at least $2,500 to waive this fee. 

If you're not careful, these smaller expenses can really add up! For example, if you had an account worth $10,000 dollars and didn't trade anything for six months, it would cost you $250 in additional fees just to maintain your account ($25 x 6) plus another $100 ($1 x 6) every month thereafter. 

When you consider that the cost of doing business is generally lower on FTX because we don't charge commissions when buying or selling stocks, it becomes clear how crucial it is to be mindful of these smaller expenses so they don't undermine your profits.

Funding Withdrawal Fees

FTX charges a withdrawal fee for any money deposited to the exchange that is then withdrawn. These withdrawal fees are based on the currency and amount being withdrawn, but range from 0.4% to 3%. 

For example, if you deposit $1,000 USD and withdraw $900 USD, you will be charged a 1% fee. It is best practice to withdraw your full balance after trading instead of leaving funds in the account so that you can avoid these withdrawal fees. 

You also don’t want to incur these fees more than once, as it cuts into your potential profits. If you deposit $1,000 USD and use half of it to trade with before withdrawing the remaining $500 USD, then you will have incurred a 2% fee (2% x ($1000-$500)=$100). 

In order to avoid this situation altogether, always withdraw your entire balance when done trading. While some traders may prefer to leave their balance at FTX in anticipation of future trades, keep in mind that the longer you hold onto those funds the more likely they will be subject to a withdrawal fee. 

Keep an eye out for promotional offers that waive withdrawal fees temporarily. Typically, these promotions last one week and offer up to 100% bonus on all deposits. 

If you deposit $10,000 USD during a promotion week and trade responsibly without incurring any withdrawal fees throughout the promotion period, you would end up with $11,000 USD upon exiting the promotion period – equivalent to a 10% profit! 

On the other hand, if you made six transactions of $2500 USD each and withdrew everything within two days, you would only make 9% profit. What this means is that minimizing withdrawal fees is just as important as maximizing trading gains.