Spread, commission and swap: the real cost of every trade
- The three costs every trade pays, and where to see them
- How to work out a trade's cost in dollars before you open it
- Why costs decide whether short-term strategies can work at all
You start every trade slightly behind
The moment you open a trade it shows a small loss. That's not bad luck; it's the cost of trading. There are three kinds, and together they decide whether a strategy that looks good on a chart can make money in a real account.
1. The spread
Every price has two sides: the bid (what you sell at) and the ask (what you buy at). The gap is the spread. If EURUSD is 1.16500 / 1.16508, the spread is 0.8 pips.
0.8 pips × $10 × 1 lot = $8 per round trip, paid once, at the open.
Spreads are not fixed. They widen around major news, at the daily rollover (around 5 pm New York time), on Monday opens and in thin markets. A 1-pip spread can briefly become 10.
2. Commission
"Raw" or "ECN" accounts offer very tight spreads (often 0.0–0.3 pips) and charge a commission instead, typically around $6–7 per standard lot, round trip. Example: 0.2-pip spread ($2) + $7 commission = $9 per lot. Compare accounts by this total, not by the spread alone.
3. Swap (overnight financing)
Hold a position past the daily rollover and you pay or receive swap, based on the interest-rate difference between the two currencies plus the broker's fee. It can be positive on one side and negative on the other. Most brokers charge three days' swap on Wednesday night for forex to cover the weekend (some do it on Friday for other symbols). For a trader holding for weeks, swap can be the biggest cost of all. Swap-free (Islamic) accounts replace it with other fees.
Why costs matter more for short trades
Costs are fixed per trade, but targets aren't. A scalper aiming for 5 pips with 1 pip of cost gives away 20% of every winner. A swing trader aiming for 150 pips with the same cost gives away less than 1%.
| Target | Cost (pips) | Share of the target lost to costs |
|---|---|---|
| 5 pips | 1.0 | 20% |
| 20 pips | 1.0 | 5% |
| 150 pips | 1.0 | 0.7% |
Try it
- Choosing a broker by "zero spread" and ignoring the commission.
- Scalping during news or rollover, when spreads are at their widest.
- Holding trades for weeks without checking the swap rate.
How this works when you copy trades
Check yourself
- Every trade pays the spread; raw accounts add commission; overnight trades add swap.
- Compare brokers by total cost per lot, not by the spread alone.
- The shorter your target, the more costs decide whether you make money at all.