What you'll learn
- Calculate the round-trip cost of a trade
- Compare a standard account with a raw-spread account
- Estimate the financing cost of a multi-day position
Round-trip cost
On a standard account the cost is the spread, paid once per trade, since you cross it on entry and are valued at the other side on exit. On a raw-spread account it is the raw spread plus the commission on both sides. Express both in pips per lot so they can be compared directly; a commission of 3.5 dollars per side on a standard lot is 7 dollars per round trip, which is 0.7 pips on EUR/USD.
Standard versus raw
| Standard account | Raw-spread account | |
|---|---|---|
| EUR/USD spread | 1.2 pips | 0.1 pips |
| Commission per round trip | None | 7 dollars, about 0.7 pips |
| Total cost per standard lot | 12 dollars | 8 dollars |
| Best for | Occasional traders, small sizes | Active traders, larger sizes |
Financing
Swap is quoted per lot per night and can be positive or negative depending on which currency yields more. Most brokers charge triple swap on Wednesday to cover the weekend. A trade held for a week in a pair with a large negative swap can cost more in financing than in spread; a trade in the other direction can earn. Check the broker's swap table before planning a multi-day trade, and remember that swaps change as interest rates do.
Hidden and occasional costs
- Inactivity fees after a period without trades, common at larger brokers.
- Deposit and withdrawal fees, often waived for cards and charged for wires.
- Currency conversion when you deposit in a currency other than your account's.
- Spread widening around news, which can multiply the entry cost for seconds at a time.
Example: A month of trading at two brokers
You trade 40 standard lots a month on EUR/USD. At a standard account with a 1.2-pip spread the cost is 40 times 12 dollars, 480 dollars. At a raw account with a 0.1-pip spread and 7 dollars commission the cost is 40 times 8 dollars, 320 dollars. The raw account saves 160 dollars a month. At 4 lots a month the difference is 16 dollars, which may not be worth a higher minimum deposit.
Key takeaways
- Total cost is spread plus commission plus financing, in pips per lot.
- Raw-spread accounts usually cost less for active traders.
- Swaps can dominate the cost of a multi-day trade.
- Check inactivity, funding and conversion fees before opening an account.
Knowledge check
Trading forex, CFDs and other leveraged products carries a high risk of losing money. This lesson is general education, not advice. Risk disclosure.