Understanding Broker Costs: Commission vs. Spreads
Before diving into the specifics of IC Markets and Plus500, it's essential to understand the two primary ways brokers charge for their services: commission and spreads.
Spreads refer to the difference between the buy (ask) and sell (bid) price of a financial instrument. Brokers offering "commission-free" trading typically widen their spreads to incorporate their fee. This means the cost is built into every trade you make through the price difference.
Commission is a direct fee charged per trade, often a fixed amount per lot traded or a percentage of the trade value. Brokers charging commission usually offer tighter, or "raw," spreads, as their profit comes directly from this fee. This model is often preferred by high-volume traders who can benefit from the tighter spreads.
IC Markets: Raw Spreads and Commission-Based Trading
IC Markets is renowned for its competitive raw spreads, particularly on its True ECN and cTrader accounts. These accounts charge a commission per standard lot traded (round turn). For example, on the True ECN account, the commission is typically $3.50 per lot per side, or $7.00 per standard lot round turn. Their Standard account, however, offers commission-free trading with slightly wider spreads. IC Markets' transparent pricing model, combined with high execution speeds, appeals to algorithmic traders and those seeking direct market access.
Plus500: Spread-Only Model
Plus500 operates exclusively on a spread-only model, positioning itself as a "commission-free" broker. Their revenue is generated entirely from the spread, which means their quoted prices already include their trading cost. While this simplifies the cost structure for many traders, it's crucial to note that the spreads might be wider compared to the raw spreads offered by commission-based brokers. Plus500 also charges an inactivity fee after a certain period and potential overnight funding fees for positions held open after a certain time, which are important considerations for longer-term traders.
Comparison Table: IC Markets vs Plus500
Here's a side-by-side look at key aspects:
| Feature | IC Markets | Plus500 |
| :------------------------ | :-------------------------------------------------------------- | :--------------------------------------------------------------- |
| Spreads (EUR/USD) | From 0.0 pips (True ECN, cTrader) | Typical 0.8 pips (instrument specific) |
| Spreads (GBP/USD) | From 0.5 pips (True ECN, cTrader) | Typical 1.5 pips (instrument specific) |
| Spreads (XAU/USD) | From 0.1 pips (True ECN, cTrader) | Typical 0.35 points (instrument specific) |
| Commission (Forex) | $3.50/lot per side on True ECN/cTrader (or commission-free std) | None (spread-only model) |
| Minimum Deposit | £200 (or equivalent) | £100 (or equivalent) |
| Regulators (UK) | FCA (through IC Markets (EU) Ltd) | FCA (Plus500UK Ltd) |
| Platforms | MetaTrader 4, MetaTrader 5, cTrader | Proprietary WebTrader & Mobile App |
| Secondary Keywords | forex broker review, spread betting, CFD trading | forex broker review, spread betting, CFD trading |
*Figures are typical and at time of writing — please check each broker's official website for the most current information.*
Verdict by Trader Type
For Active Day Traders & Scalpers: IC Markets generally holds an edge due to its raw spreads and commission-based model on ECN accounts. The tighter spreads can significantly reduce trading costs for high-frequency traders, even with the commission factored in. Their offering of MT4, MT5, and cTrader provides robust tools for advanced analysis and automated trading.
For Casual Traders & Beginners: Plus500's straightforward, spread-only model and user-friendly proprietary platform might be more appealing. The absence of a separate commission can simplify cost calculations, and the platform is designed for ease of use, making it accessible for those new to CFD trading. Their lower minimum deposit is also a draw.
For Traders Seeking Diverse Platforms: IC Markets offers a wider choice of industry-standard platforms (MT4, MT5, cTrader), which provides flexibility and access to a vast ecosystem of indicators and expert advisors. Plus500's proprietary platform is functional but doesn't offer the same level of customisation or third-party integration.
Important Considerations
Overnight Funding/Swap Fees: Both brokers charge overnight funding or swap fees for positions held open past a certain time. These can vary significantly depending on the instrument and market conditions and should always be checked.
Inactivity Fees: Plus500 charges an inactivity fee after three months of no login activity. IC Markets does not typically charge an inactivity fee.
Execution Model: IC Markets offers an ECN/STP execution model, providing direct market access and often better fills. Plus500, as a market maker, typically acts as the counterparty to your trades. While both are reputable, the execution model can influence trading conditions and potential for slippage.
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CFD trading carries significant risk and you could lose money. Ensure you understand the risks involved before trading. Please note that this comparison is for informational purposes only and does not constitute financial advice. Always conduct your own thorough research.