Forex & Currencies6 min read
Spreads, Commissions and Swaps: What Forex Really Costs You
How the three main forex trading costs work, with worked examples: when a raw-spread account beats a commission-free one, and why a swap can outweigh the spread on longer trades.
By Daily Forex Report Forex Desk
Two brokers can quote the same pair and charge you very different amounts for the same trade. One advertises "zero commission" and the other shows a tight spread plus a fee. Neither is hiding anything, but the headline numbers describe different parts of the bill, and a third charge, the swap, only shows up if you keep a position overnight.
This guide walks through all three with simple arithmetic you can rerun with your own broker's figures. The spreads, swaps and fees in the examples are hypothetical unless a source is named.
Spread: the cost you pay on entry
Every forex quote has two prices. You buy at the ask and sell at the bid, and the gap between them is the spread. Open a position and close it straight away and you lose that gap, because you bought high and sold low.
Spreads are quoted in pips. On a pair like EUR/USD, a standard lot (100,000 units) is worth about $10 per pip, so a 1.2-pip spread costs roughly $12 per round trip on one lot. A 0.5-lot position at the same spread costs about $6.
Spreads are not fixed. They tend to be narrower when many participants are quoting and wider when liquidity thins out, which is why the time of day matters. We cover that in our guide to forex trading sessions.
Commission: the fee that replaces part of the spread
Some brokers build their fee into the spread. Others quote a raw interbank-style spread and add a separate commission. For example, Pepperstone's pricing page lists its Razor account on MT4 and MT5 at $3.50 per lot, per side, with raw spreads from 0.0 pips, while its Standard account charges no commission on margin FX trades and instead includes a 1-pip markup. Charges vary by platform: the same page quotes $6 per round trip on cTrader and $7 on TradingView.
Because commission is charged on each side, a round trip on one lot at $3.50 per side costs $7. On EUR/USD that is the same as 0.7 pips. That conversion is the whole trick: it lets you compare the two account types in one unit.
A worked comparison
Suppose a trader opens and closes one standard lot of EUR/USD. The numbers below are invented to show the method.
The raw-spread account wins by $3perlothere.Itstopswinningwhenitsspreadplus0.7pipsclimbsabovethecommission-freespread.Iftherawaccountaveraged0.6pipsinstead,itstotalwouldbe1.3pips-equivalent($13), which is more than $12.
So the question to ask is not which model is cheaper in general, but what each costs at the times you actually trade. Record both for a week and the answer is usually clear.
| Commission-free account | Raw-spread account | |
|---|---|---|
| Typical spread (hypothetical) | 1.2 pips | 0.2 pips |
| Spread cost at $10 per pip | $12.00 | $2.00 |
| Commission, $3.50 per side | none | $7.00 |
| Round-trip total | $12.00 | $9.00 |
Swap: the cost of staying in the trade
A swap, also called rollover, is the interest charge or credit for holding a position past the daily cut-off, which many brokers set at 17:00 New York time. Pepperstone's guide puts it plainly: the direction depends on the difference in interest rates between the two currencies, so a swap can be a credit or a debit depending on which way you are trading.
The mechanics trace back to settlement. The BIS defines a spot transaction as an exchange of two currencies for value within two business days. The Global Foreign Exchange Committee describes T+2 as the market standard for most pairs, with USD/CAD, USD/TRY, USD/PHP and USD/RUB settling T+1. To keep a position open past the cut-off, it is rolled to the next value date by an FX swap, in which one leg is exchanged at the spot rate and the other at a pre-agreed forward rate. The BIS notes that these contracts are typically quoted in forward points, the forward rate minus the spot rate, and that the points should reflect the interest-rate gap between the two currencies.
Why Wednesday costs triple
Value dates skip weekends. A position held through the Wednesday rollover moves its value date from Friday to Monday, which is three calendar days, so brokers charge three days of swap at once. Pepperstone's guide describes exactly this. Pairs with a T+1 convention shift the day: by the same logic, USD/CAD would roll its extra days on a different weekday, so check your broker's swap table instead of assuming Wednesday.
What a week costs
Take a hypothetical swap of minus $6 per night on one lot of EUR/USD. From Monday's rollover to Friday's, a long position collects charges for 1 \+ 1 \+ 3 \+ 1 \+ 1 \= 7 days.
Compare that with the $12 or $9 round-trip spread cost above. A scalper who closes within minutes barely notices the swap. Someone holding a trade for a month finds that the swap has become the largest line on the bill. On the other side of the ledger, a swap can also pay you, which is why holding a position in the direction of the interest-rate gap is sometimes called a carry trade.
- One week: 7 × $6 \= $42
- Four weeks: $168
The two sides do not mirror each other
In Pepperstone's own worked example for EUR/USD, a long position is debited €10.18 per day while a short position earns a credit of €6.22. If swaps were nothing but the interest-rate gap, you would expect the two to be roughly equal in size and opposite in sign. The difference is consistent with the broker adding its own margin on top. We can only see this in one published example, so treat it as an observation to test against your own broker's table, not as a rule.
Putting the three together
Here is one trade priced end to end, again with invented figures: one lot of EUR/USD on a raw-spread account, held for two weeks.
The entry cost is $9 and the holding cost is $84. This is why a strategy that holds for weeks should look at swaps first, and one that holds for minutes should look at spreads and commission first.
| Cost | Amount |
|---|---|
| Spread (0.2 pip × $10) | $2.00 |
| Commission ($3.50 × 2 sides) | $7.00 |
| Swap (2 weeks × $42) | $84.00 |
| Total | $93.00 |
A short checklist before you pick a broker or a strategy
- Convert everything to pips. Divide the round-trip commission by the pip value (for EUR/USD on one lot, $10) and add it to the spread. That is your all-in entry cost.
- Measure spreads at your trading hours, not the "from" figure on the pricing page.
- Download the swap table and read the long and short columns separately. Note which weekday is the triple day for each pair.
- Multiply by your holding time. Swap per night times the days you usually hold, plus the Wednesday effect.
- Add slippage by experience. It is the difference between the price you clicked and the price you got, and no pricing page can tell you your own number. Log it for a month.
Why it matters
Costs are the one part of trading you can control with certainty. In 2018 ESMA's analysis of retail CFD providers found that 74–89% of retail accounts lose money, with average losses per client ranging from €1,600 to €29,000. Regulators in the EU and the UK now require providers to show clients the percentage of their retail accounts that lose money. Cost alone does not explain those figures, but every extra pip of avoidable cost makes a losing result more likely.
Forex and CFD trading carry a high risk of loss. This article is educational and is not investment advice. All cost examples use invented figures except where a source is named.
Sources & Regulatory Documentation
- ■Pepperstone, Trading costs and fees (Razor and Standard commission figures)
- ■Pepperstone, FX swap trading: how do forex swaps work? (swap formula, triple-swap rule, worked EUR/USD example)
- ■BIS Data Portal, Glossary: spot transaction
- ■BIS Quarterly Review, September 2016, CIP, FX swaps, cross-currency swaps and the factors that move the basis
- ■Global Foreign Exchange Committee, FX Market Preparedness for the UK, EU, Switzerland & Liechtenstein Move to T+1 Securities Settlement (December 2025\)
- ■ESMA, ESMA agrees to prohibit binary options and restrict CFDs to protect retail investors (27 March 2018\)
- ■FCA, FCA confirms permanent restrictions on the sale of CFDs and CFD options to retail consumers (risk-warning requirement)
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