Forex Trading Costs Explained: Spread, Commission and Swap
Most new traders focus on entries and exits and ignore what each trade costs. But costs are charged on every single trade, whether it wins or loses. Over hundreds of trades they can be the difference between a profitable strategy and a losing one. This guide explains every cost you are likely to pay, with examples you can apply to your own trading.
1. The spread
The spread is the difference between the bid (sell) price and the ask (buy) price. You pay it the moment you open a trade, because you buy at the higher price and could only sell back at the lower one.
Fixed vs variable spreads
- Variable (floating) spreads change with market conditions. They are usually tight during busy hours and widen during quiet hours or major news.
- Fixed spreads stay the same in normal conditions but are often wider on average. Some brokers still widen them in extreme conditions.
When spreads widen
- Around the daily rollover, at 5:00 pm New York time.
- During low-liquidity hours and holidays.
- In the seconds around high-impact news, such as interest rate decisions.
- On minor and exotic pairs compared with majors.
A stop loss can be triggered by a widened spread even if the chart never seemed to reach your level. This is one reason to avoid very tight stops at quiet hours.
2. Commission
Some account types, often called raw spread or ECN accounts, offer very tight spreads but charge a commission per lot. Commission is often quoted per side (opening or closing) or as a round turn (both together).
To compare accounts fairly, convert the commission into pips. On a pair worth $10 per pip, $7 commission equals 0.7 pips. So the raw account above costs the equivalent of 0.9 pips per trade.
3. Swap (overnight financing)
If you hold a position past the daily rollover, your broker applies a swap, also called rollover or overnight financing. It reflects the difference in interest rates between the two currencies, plus the broker’s own markup.
- Swap can be negative (you pay) or positive (you earn), depending on the pair and direction.
- Most brokers charge triple swap on one day of the week, commonly Wednesday, to cover the weekend.
- Swap is calculated on the full position size, not on your margin.
Your platform shows swap rates for each instrument, usually in points per lot. For day traders, swap rarely matters. For swing traders holding positions for days or weeks, it can add up to a meaningful amount. Some brokers offer swap-free (Islamic) accounts, which may replace swap with a different fee structure.
4. Slippage
Slippage is the difference between the price you expected and the price you actually got. It happens when the market moves quickly or when there is not enough liquidity at your price.
- Negative slippage gives you a worse price.
- Positive slippage gives you a better price. Not all brokers pass this on.
Slippage is most common on stop orders during news releases and at the weekly open. Limit orders avoid negative slippage but may not be filled at all.
5. Other fees
- Deposit and withdrawal fees charged by the broker, bank or payment provider.
- Currency conversion if you deposit in one currency and your account is in another.
- Inactivity fees on accounts that have not traded for a period.
Read your broker’s fee page carefully before you deposit.
How costs affect your strategy
The shorter your trades, the more costs matter. Compare two traders using the same broker, each paying 1.5 pips per trade:
| Style | Typical target | Cost as % of target |
|---|---|---|
| Scalper | 6 pips | 25% |
| Day trader | 30 pips | 5% |
| Swing trader | 150 pips | 1% (plus swap) |
A scalper gives away a quarter of every winning trade to costs before considering losses. This is why scalping strategies need very low spreads, and why many beginners do better with slightly longer trades. Read our scalping guide if you want to trade short-term.
Working out what a trade really costs
Use our pip value calculator to get the exact pip value for your pair and account currency.
How to keep trading costs low
- Trade liquid pairs at liquid times. Majors during the London and New York sessions usually have the tightest spreads.
- Avoid trading right before and after big news unless your strategy is specifically built for it.
- Compare account types. If you trade often, a raw spread plus commission account may be cheaper overall.
- Trade less, but better. Fewer, higher-quality trades mean fewer costs.
- Check swap before holding overnight, especially on exotic pairs.
- Track costs in your journal. Our guide to keeping a trading journal shows how.
Frequently asked questions
Are zero-spread accounts free to trade?
Rarely. Accounts advertised with zero or near-zero spreads usually charge a commission per lot instead. Convert the commission into pips and add it to the spread to compare the real cost with other account types.
Why did my swap change from one week to the next?
Swap rates follow interest rates and broker pricing, so they are updated regularly. A central bank rate change can alter swap noticeably on the affected pairs.
Key takeaways
- The spread is paid on every trade and is the main cost for most traders.
- Commission accounts can be cheaper overall. Convert commission to pips to compare.
- Swap is charged or paid on positions held overnight, often triple on one weekday.
- Slippage is a hidden cost during fast markets.
- The shorter your trades, the more costs eat into your results.