The three costs of trading
Brokers rarely charge a visible fee for opening a trade. The costs are built into the price or added in small amounts. There are three of them: the spread, the commission and the swap. Add the cost of moving money in and out and you have the true price of trading. Knowing these costs is as important as knowing your entry, because they work against you on every trade, whether you win or lose. All numbers below are invented examples to show the arithmetic, not real quotes from any broker.
What is the spread?
You always see two prices: the bid (the price at which you can sell) and the ask (the price at which you can buy). The ask is higher. The difference is the spread, and it is the broker's main income on most accounts.
Example. EUR/USD shows bid 1.10000 and ask 1.10012. The spread is 0.00012, which is 1.2 pips. The moment you buy, you are 1.2 pips behind, because you could only sell back at the bid. The price must move 1.2 pips in your favour before you reach break-even.
To turn pips into money, use the pip value. For 0.10 lot of EUR/USD one pip is about 1 USD, so a 1.2 pip spread costs about 1.20 USD. For 1.00 lot it costs about 12 USD. See lots, pips and leverage for the formulas.
Fixed and floating spreads
Most retail brokers use floating (variable) spreads. They are narrow in busy, liquid hours and widen when the market is quiet or when big news is released. A fixed spread stays the same, but it is not always available and may come with other trade-offs such as requotes. Compare spreads at the times you trade. A broker that looks cheap at midday in Europe can be expensive during the Asian night or at a rollover.
Commission accounts
Some account types offer a very low or zero spread, and charge a commission per lot instead. The commission is usually quoted per side or per round turn (opening and closing). Check which one is meant, since it changes the total by a factor of two.
Example comparison. Account A has a 1.2 pip spread and no commission. Account B has a 0.2 pip spread and a 7 USD commission per 1.00 lot round turn. On 1.00 lot of EUR/USD (10 USD per pip):
| Spread cost | Commission | Total | |
|---|---|---|---|
| Account A | 1.2 x 10 = 12 USD | 0 | 12 USD |
| Account B | 0.2 x 10 = 2 USD | 7 USD | 9 USD |
In this invented example Account B is cheaper, but only if you trade with large volume or very actively. For a small trader who opens a few trades, the difference is tiny and the simpler account may be better. Always calculate with your own typical lot size.
What is swap?
Swap (also called rollover or overnight interest) is a charge or credit applied when you hold a position past the daily rollover time. It reflects the interest-rate difference between the two currencies in the pair, plus the broker's margin. If you buy the currency with the higher interest rate, you may earn a positive swap. In many cases, especially on retail accounts, the swap is negative for both directions.
Swap is shown in the contract specification of each instrument, per lot per night. Typically, the swap on Wednesday night is applied three times, to cover the weekend. A long-term position on gold or an index may collect noticeable swap costs. Scalpers and day traders who close before rollover do not pay it.
Example. A position has a negative swap of 6 USD per lot per night. Holding 0.50 lot for 10 nights costs 6 x 0.5 x 10 = 30 USD, which is a real cost that does not show on the chart.
Swap-free accounts
Some brokers offer swap-free (Islamic) accounts for clients whose religion forbids interest. Eligibility depends on country and broker rules, and some brokers replace swap with a small administration fee on longer holds. Ask the broker and read the conditions. Use of the account type only to avoid costs is usually not allowed.
How account types usually differ
Most large brokers offer two families. The names change, so treat this as a general pattern:
- Standard or cent accounts: no commission, wider spread, small minimum deposit. Suitable for learning and small trades.
- Raw, Zero or professional accounts: very tight spread plus commission, often a higher minimum deposit. Suitable for frequent traders who understand their numbers.
Read the broker pages, such as our Exness review, to see how the account types are described, and check the exact spreads in the demo terminal. We do not quote fixed spread numbers for brokers unless the broker publishes them, because they change with the account type, the market and the time of day.
Other costs to check
- Deposit and withdrawal fees: some methods are free, some charge a percentage, and your bank may charge too.
- Currency conversion: depositing in local currency (for example PKR, NGN or BDT) into a USD account involves an exchange rate that may include a margin.
- Inactivity fees: some brokers charge accounts that have no activity for months.
- Slippage: the difference between the price you clicked and the price you got, mostly in fast markets.
A simple cost calculator you can do by hand
- Find the spread in pips on your pair in the demo terminal.
- Multiply by the pip value of your lot size.
- Add the round-turn commission, if any.
- Add the swap per night multiplied by the number of nights you plan to hold.
- Divide the total by your planned risk per trade. If costs are more than a few percent of the risk, the setup is expensive.
If you trade ten times a week, a cost of 12 USD per trade is 120 USD per week, and your strategy must earn more than that just to break even. This is why frequent trading with a wide spread is hard. For deeper protection of your account, see risk management.
Spread across the day: a simple test you can run
Open a demo account and write down the spread of one pair at four moments: the Asian night, the London morning, the New York overlap and right before a major news release. Repeat it for a few days. You will probably see that the spread changes by several times between the calmest and the busiest moments. The result tells you when your strategy is cheapest to run. A strategy that makes small profits on every trade, such as scalping, is more sensitive to this than a strategy that holds trades for days, because the spread is a bigger share of each gain.
Cost as a share of your target
A helpful way to judge costs is to compare them with the distance to your target. Example (invented numbers): if your take-profit is 10 pips away and the total cost is 1.5 pips, costs eat 15% of the best case. If your target is 100 pips, the same cost is 1.5%. This is why very short-term trading needs tight spreads and accurate execution, and why most beginners are better off with a slower approach where costs are a smaller part of every outcome.
Costs also matter for your break-even win rate. If you risk 20 pips to make 20 pips and the spread is 2 pips, you effectively risk 22 to make 18. You then need to win more than 55% of the time to break even, not just 50%. Always include the spread in your plan.
Compare Exness accounts in a demo
Risk warning
Costs reduce your results on every trade, and forex and CFDs remain high-risk products. Leverage can magnify losses, and most retail traders lose money. Spread, commission and swap values depend on the broker, account and market, so confirm them in your own terminal. Trade only with money you can afford to lose entirely, and only if you are 18 or older. This article is education, not personal advice.