Spread vs Commission: How Forex Trading Costs Really Work

Every trade has a cost, even when no fee appears on your statement. Understanding how that cost is charged helps you pick the right account and avoid surprises, especially if you trade often.

What is the spread?

The spread is the difference between the price you can buy at (the ask) and the price you can sell at (the bid). If EUR/USD is quoted 1.0850 / 1.0851, the spread is 1 pip. When you open a trade, you start slightly in the red by the size of the spread, because you'd have to close at the other side of the quote.

Spreads are not fixed. They are usually tightest when markets are busy and can widen around news, at the daily rollover and in quiet periods.

What is commission?

Some accounts pass on near-market spreads and charge a separate commission per lot instead. Commission is usually quoted per side (when you open and again when you close) or per round turn (both combined), so check which before comparing.

Two ways to pay

Spread-only (Standard)

The broker's charge is built into a wider spread. There's no separate commission line, which makes costs simple to read.

Raw spread + commission

Spreads are close to the underlying market, sometimes near zero on major pairs, and you pay a fixed commission per lot. The total cost is often lower for active or larger traders and is very transparent.

How to compare them

Convert everything into money per standard lot:

• Spread cost = spread in pips × pip value.
• Total raw cost = raw spread in pips × pip value + round-turn commission.

Illustrative example: a Standard account offers EUR/USD at 1.1 pips; a raw account offers 0.1 pips plus $7 round-turn commission. With pip value at $10, the Standard trade costs $11 and the raw trade costs $1 + $7 = $8. In this example the raw account is cheaper. Swap in real numbers from your platform to make your own comparison.

Other costs to know

• Overnight financing (swap). Charged or credited when you hold a position past the daily rollover. Swing traders can pay more in swaps than in spreads.
• Slippage. In fast markets, your order may fill at a slightly different price than requested.
• Currency conversion. Profits and losses in another currency are converted to your account currency.

Which should you choose?

If you trade a few times a week and like simple pricing, spread-only is often fine. If you trade frequently, scalp, or trade larger sizes, raw spread plus commission usually works out cheaper. Compare TradeTime's options on our account types page and model trades with the profit calculator.

CFDs are leveraged products and you can lose your money. This article is for education only and is not investment advice.