Forex

A USD-account trader on a commission-free account opens a long EUR/USD position of 1 standard lot with the mid-price (the midpoint between bid and ask) at 1.0850 and closes it with the mid-price at 1.0900, a 50-pip move:

Position size = 100,000 EUR. Mid-price at entry 1.0850, at exit 1.0900 — a 50-pip move in the trader's favour. Pip value = $10 per pip on a USD-quoted pair, 1 standard lot. Gross profit on the move = 50 × $10 = $500, before costs.

Costs on the round trip: one full spread in total, not one at entry and another at exit. The trader buys at the ask, half a spread above the mid, and sells at the bid, half a spread below it; with a 1.2-pip spread at both ends (the figure varies by broker, account type and session), the two halves add up to 1.2 pips. Round-trip spread cost = 1.2 pips × $10 = $12. Net profit before any swap = $500 − $12 = $488.

If the position is held past the daily rollover (typically 17:00 New York), swap applies. At a long EUR/USD swap of approximately −$7 per night (at an illustrative 1.0850, with the ECB deposit rate at 2.50%, the upper limit of the US federal funds target range at 4.00% and an illustrative total broker markup of about 0.8% a year; the figure varies by broker and moves with both central banks' rates), holding across two ordinary rollovers deducts another $14; if one of them is the Wednesday rollover, which on spot FX applies three days of swap unless a bank holiday moves the settlement dates, the charge is $28.

Final P&L = $488 − $14 = $474 if held across two ordinary rollovers ($460 if one is Wednesday's), $488 if closed before the first rollover. The same trade in pips ignores the cost layer entirely. A 50-pip movement on EUR/USD in the position's favour is a gross gain of $500 on 1 standard lot; the costs determine whether the account changes by what the pip count suggests or by something materially less, and on a long enough hold the swap alone can turn it into a loss.

The trade above rests on two ideas that each carry their own page: the instrument being traded, and the two currencies inside it.