In briefCompare the all-in cost of the trade you actually make — spread, commission, financing and conversion — rather than the broker’s best advertised spread.
The spread in one sentence
Every forex quote has two prices. The bid is the price at which the market will buy from you; the ask is the price at which it will sell to you. The gap between them is the spread.
If EUR/USD is quoted at 1.08400 bid and 1.08408 ask, the spread is 0.00008, or 0.8 pips. A newly opened trade begins on the wrong side of that gap: the market has to move far enough to cover the spread before the position is profitable, ignoring any other fees.
Turning pips into money
A pip is a price increment, not a fixed cash amount. The money value changes with the currency pair, account currency and position size. For many USD-quoted major pairs, one pip on a standard lot of 100,000 units is approximately $10; on a mini lot of 10,000 units it is about $1.
Using that simplified case, a 0.8-pip spread costs roughly $8 on one standard lot, $0.80 on one mini lot and $0.08 on one micro lot when the trade is opened. Closing and execution details can affect the realised result, but the conversion is a useful comparison tool.
| Position size | Approx. pip value | Cost at 0.8 pips |
|---|---|---|
| 100,000 units | $10.00 | $8.00 |
| 10,000 units | $1.00 | $0.80 |
| 1,000 units | $0.10 | $0.08 |
Illustrative EUR/USD-style example in a USD account. Pip values vary by pair and account currency.
Raw spread versus spread-only accounts
Brokers commonly package pricing in two ways. A spread-only account builds more of the broker’s charge into the quoted spread. A raw or commission account shows a tighter market spread and adds a separate commission per side or round turn.
Neither label is automatically cheaper. Suppose one account averages 1.2 pips with no separate commission. Another averages 0.2 pips and charges $7 per standard-lot round turn. In the simplified $10-per-pip example, both have an all-in trading cost around $12. What matters is the combined number under comparable conditions.
Record the typical spreadUse the pair and trading session you actually care about. The minimum “from 0.0” figure is not an average.
Convert commission into pipsFor a standard lot where one pip is about $10, a $7 round-turn commission is equivalent to roughly 0.7 pips.
Add the twoA 0.2-pip spread plus 0.7 pips of commission produces an all-in cost of about 0.9 pips before financing and execution effects.
Why spreads widen
A spread is not always fixed. It can widen when available liquidity falls or uncertainty jumps: around major economic releases, during market open and close, on holidays, or when an unexpected event causes rapid repricing. Less-traded pairs also tend to have wider spreads than major pairs.
This matters to stop orders and short-duration strategies. A trade that looks viable using a calm-session average may behave very differently during a news release. Demo results may also be cleaner than live execution if the simulation does not reproduce the same liquidity, slippage and queueing.
The costs that sit beyond the spread
For positions held overnight, financing can matter more than the entry spread. Depending on the instrument and direction, the account may be debited or credited using the broker’s swap or financing schedule. Triple-swap days and holiday adjustments can make the amount unintuitive.
Also check currency conversion, inactivity, data and withdrawal charges. Then consider execution: slippage is not a published fee, but the difference between the requested and filled price changes the result. The honest comparison is an all-in cost for your position size, holding period and funding method.
- Spread at the time and session you trade
- Commission on opening and closing
- Overnight financing for the expected holding period
- Account-currency conversion
- Slippage and order execution
- Non-trading fees such as withdrawals or inactivity
