Every trade has a cost before the market moves a single pip. Costs are small per trade, but they come out of every trade, win or lose, and they add up to one of the biggest differences between traders who make money and traders who almost do.
The spread
You buy at the higher ask price and sell at the lower bid price. The gap is the spread, and you pay it as soon as you open a trade: a new position always starts slightly negative. Spreads are tightest on the busiest instruments during the busiest sessions and widen during quiet hours, around the daily rollover and during major news.
Commission
Some accounts charge only through the spread. Others, often called raw or ECN accounts, offer very tight spreads plus a fixed commission per lot. Futures always charge commission per contract, plus exchange and clearing fees. Compare the total cost, not just the headline spread.
Worked example: one round trip
1 standard lot of EUR/USD on a raw account.
Spread 0.2 pips × $10 = $2. Commission $3.50 per side × 2 = $7.
Total = $9 per round trip, the same as a 0.9-pip spread on a commission-free account. Neither is automatically cheaper; you have to add it up.
Swap (overnight financing)
Hold a forex or CFD position past the daily rollover (usually 5 p.m. New York time) and you pay or receive a swap. It is based on the interest-rate difference between the two currencies, plus the broker's markup. If you buy a currency with a higher interest rate than the one you sell, you may earn a small credit. In most cases, after markup, you pay.
In forex, Wednesday night's swap is usually charged three times, because spot trades settle two business days later and that rollover covers the weekend.
Slippage
Slippage is the difference between the price you expected and the price you got, as you saw in chapter 8. It can be negative or, less often, positive. It is largest on market and stop orders in fast markets and thin hours.
Why costs matter more on shorter timeframes
Costs are roughly fixed per trade, but targets shrink with your timeframe. The same 1.5-pip round-trip cost is a small fee for a swing trader and a huge tax on a scalper.
| Cost | When you pay it | How to reduce it |
|---|---|---|
| Spread | Every trade, on entry | Trade liquid instruments in busy sessions |
| Commission | Every trade, per lot or contract | Compare total cost per round trip |
| Swap / financing | Each night a position is held | Check rates; avoid holding through Wednesday if costly |
| Slippage | Market and stop orders in fast moves | Avoid big news; use limits where you can |
Key takeaways
- You buy at the ask and sell at the bid; the spread is paid on every trade.
- Compare total cost per round trip: spread plus commission, not either on its own.
- Swaps are charged on positions held overnight, usually triple on Wednesday in forex.
- Shorter-term trading is far more sensitive to costs, because the targets are smaller.