Level 3 · Lesson 10 of 12 · 4 min read
Forex Trading Costs: Spread, Commission, and Swap
Know exactly what you're paying on every trade.
Researched and written by Laurent Three Types of Trading Costs
Spread
The bid-ask gap. Paid on every trade. Usually 0.5-3 pips for majors.
Commission
Fixed fee per lot on ECN accounts. Usually $3-7 per round-turn lot.
Swap
Overnight holding fee. Can be positive or negative. Irrelevant for day traders.
"Zero Commission" Is Not Free
Many brokers advertise "zero commission trading." This means they make money from the spread instead. A "zero commission" broker with a 1.8 pip spread may cost the same as a "$3.50 commission" broker with a 0.3 pip spread.
The comparison for EUR/USD on a mini lot (0.10):
| Broker Type | Spread | Commission | Total Cost per Trade |
|---|---|---|---|
| Standard (no commission) | 1.8 pips = $1.80 | $0 | $1.80 |
| ECN (commission) | 0.3 pips = $0.30 | $0.35/lot = $0.35 | $0.65 |
The ECN account is cheaper despite charging commission. Always compare total cost.
Cost as a Percentage of Your Target
This is the metric that matters: how much of your expected profit goes to costs?
| Trade Target | Cost (2 pip spread) | Cost as % of Target |
|---|---|---|
| 10 pips (scalp) | 2 pips | 20% |
| 30 pips (day trade) | 2 pips | 6.7% |
| 80 pips (swing) | 2 pips | 2.5% |
| 200 pips (position) | 2 pips | 1% |
The takeaway: If you're scalping for 10 pips, costs eat 20% of your profit. If you're swing trading for 80 pips, costs are negligible. This is one reason why scalping is much harder than swing trading, and why beginners should start with longer timeframes.
Key Takeaways
- • "Zero commission" brokers make money from wider spreads. There is always a cost.
- • Total cost = spread + commission + swap. Compare total cost, not just one component.
- • A scalper doing 20 trades/day pays far more in costs than a swing trader doing 3/week.
- • Always calculate your cost as a percentage of your expected profit on the trade.