In short
- All-in cost = spread + commission (+ financing if you hold overnight).
- On EUR/USD, one pip on one standard lot ≈ $10.
- Raw-spread accounts are usually cheaper for active traders; standard accounts are simpler.
- Always compare spreads at the times you trade.
The three parts of trading cost
Spread
The difference between the buy (ask) and sell (bid) price. If EUR/USD is quoted 1.08740 / 1.08749, the spread is 0.9 pips. You pay it every time you open and close a trade.
Commission
Raw-spread or ECN accounts pass on much tighter market spreads and charge a separate commission, usually quoted per lot per side or per round turn (open + close).
Overnight financing
Positions held past the daily rollover are charged (or occasionally credited) a financing fee based on interest rates plus the broker's mark-up. For multi-day trades this can be the biggest cost of all.
How to calculate it: worked examples
Assume one standard lot (100,000 units) of EUR/USD, where one pip = $10.
| Standard account | Raw-spread account | |
|---|---|---|
| Average spread | 0.9 pips | 0.1 pips |
| Spread cost | 0.9 × $10 = $9.00 | 0.1 × $10 = $1.00 |
| Commission (round turn) | $0 | e.g. $6.00 |
| All-in cost per lot | $9.00 | $7.00 |
In this example the raw-spread account is $2 cheaper per lot. Trade 20 lots a month and that's $40 a month — worth having. But if the commission were $9 per round turn, the raw-spread account would cost $10 per lot and the standard account would win. That's why you should always do the sum with each broker's real numbers.
Converting to pounds
If your account is in GBP, divide the dollar cost by the GBP/USD rate. At 1.27, a $9 cost is about £7.09.
When spreads widen
- Daily rollover (around 22:00 UK time) — liquidity is thin and spreads can widen sharply.
- Major news — central bank decisions, US jobs data and UK inflation figures.
- Sunday open — the first minutes of the week.
- Exotic pairs — always wider than majors.
A broker's "from 0.0 pips" is the best case. Look for published average spreads, ideally broken down by session.
Other costs to check
- Currency conversion if you fund in a different currency from your account base
- Inactivity fees after months without trading
- Withdrawal fees (most FCA brokers don't charge, but some payment methods do)
- Guaranteed stop-loss premiums, if you use them
Overnight financing: a worked example
Brokers typically calculate daily financing as a benchmark interest rate plus or minus a mark-up, applied to the position's value. As an illustration, holding a £20,000 position with a combined annual financing charge of 6.5% costs about:
£20,000 × 6.5% ÷ 365 ≈ £3.56 per night.
Hold for 20 nights and that's around £71 — far more than the spread on a single trade. Many brokers charge three days' financing on one weekday night (often Wednesday) to cover the weekend. Check each broker's swap rates in its platform or on its website.
Total cost by trading frequency
Assuming one standard lot per trade on EUR/USD, a 0.9-pip standard spread vs 0.1 pips + $6 commission (illustrative):
| Trades per month | Standard account | Raw-spread account | Difference |
|---|---|---|---|
| 5 | $45 | $35 | $10 |
| 20 | $180 | $140 | $40 |
| 60 | $540 | $420 | $120 |
How to compare brokers fairly
- Use the same instrument, trade size and time of day for every broker.
- Compare average spreads, not minimum "from" spreads.
- Add commission and convert everything to one currency.
- If you hold trades overnight, compare swap rates too.
- Test on a demo account during the hours you'll actually trade.
Frequently asked questions
What is a pip?
For most currency pairs, a pip is the fourth decimal place (0.0001). For JPY pairs it's the second decimal place (0.01).
How much is a pip worth?
On EUR/USD, one pip on a standard lot (100,000 units) is worth $10. On a mini lot (10,000) it's $1, and on a micro lot (1,000) it's $0.10.
Are spreads fixed?
Most brokers offer variable spreads, which widen at quieter times — around the daily rollover, at weekends' open and during major news.
CFDs and spread bets are complex instruments and come with a high risk of losing money rapidly due to leverage. Most retail investor accounts lose money when trading these products. You should consider whether you understand how they work and whether you can afford to take the high risk of losing your money.