The promise of flexibility, high liquidity and global access is an attraction to many traders of the Dutch, many of whom actually trade in the forex market because of the promise of such issues, but the reality is that the actual costs to trade often run well beyond the spreads and commissions. Under the allure of 24-hour markets and leveraged opportunities are costs which can silently consume profits unless traders are careful. Under platform fee to taxation, the unknown expenses of forex trading in the Netherlands may have a great influence on long term returns particularly to new entrants.
One of the expenses that cannot be noticed is the overnight financing fee or swap fee which is charged when traders have positions outstanding after the close of the daily market. Although the rates charged by every forex broker are different, the charges might add up very fast particularly in leveraged transactions. Most Dutch investors do not accurately estimate the potential effects of such charges on the profitability in the longer term, especially when trading pairs with huge interest rate differentials. A seemingly minor fee on a daily basis could turn into a significant source of earnings loss on various deals that could be in the form of weeks and months.
Account inactivity or withdrawal fees are another cost that is easily disregarded. Some online brokers have an upkeep fee when an account has not been used in a long time or may have a fee when transferring funds. These are avoidable and unexpected expenses to Dutch traders who either trade occasionally or open multiple accounts. To make sure that profits are not pitted at administrative fees which look inconspicuous at first sight, it is necessary to select a transparent forex broker which very clearly announces such charges.
Many traders based in the Netherlands also suffer with currency conversion expenses as they reduce returns. Given that the majority of the trading accounts are in U.S dollars or euros, then converting costs may arise during a deposit or withdrawal in a foreign currency. Even a percentage charge will add up over time, especially to those who often have to transfer money in and out of banks and even to trading accounts. This kind of cost can be minimized by using a broker which supports accounts in various currencies or local payment solutions.
Forex trading in the Netherlands also presents an extra cost complexity due to tax implications imposed on the entire cost structure. The Dutch law system would treat trading profits as a wealth tax system and not capital gains, though traders are required to record their net asset value as an annual count. Although this can be easily imagined, sloppiness in record-keeping or inadequate understanding in the area of offshore broker reporting may lead to inaccurate calculations and fines. Traders can easily deal with this risk by consulting another tax expert who is knowledgeable on forex regulations.
Market volatility and slippage are indirect, but effective expenses Dutch traders have to incur on a regular basis. Execution prices can be lower or higher than the target entry or exit points during times of strong volatility; hence resulting in net smaller gain or loss. This is more evident to the traders with market orders as opposed to limit orders. The slippage can be minimized by selecting a broker who has a record of executing orders with low latency and thus traders would not be subjected to the hidden costs associated with market fluctuations.
Finally, forex trading in the Netherlands cannot be successful based only on strategy and timing. It involves a clear idea of all the possible costs that affect the profitability. Starting with the swap rates, to regulatory compliance, they all add to the actual cost of being in the market. Dutch traders who will take the time to evaluate these costs, evaluate the policies of the brokers and ensure that they have transparency in their trading business are much more in a position to attain sustainable profits without falling victim to the costs that lie under the carpet.
