The real cost of a trade: spread, commission and swap combined

A trade on a forex pair carries three separate costs, and a different event triggers each one. Spread is paid through the price when the position opens and when it closes. Commission is a separate charge set by the broker, taken when the position opens and when it closes or, on some accounts, as one round-turn amount at the open. Swap is the overnight financing debited or credited at each daily rollover the position is held through, at a time the broker sets.

Every figure on this page comes from one position: 1 standard lot of EUR/USD (100,000 euros) bought with the mid price at 1.1253 on a USD account, opened on a Monday and closed on the following Monday before that day's rollover. Its notional value is 100,000 × 1.1253 = $112,530. The spread, the commission and the swap markup used below are illustrative assumptions; each broker sets its own figures for each account type.

Margin is not one of the costs. The $1,125.30 the position holds as margin at 1:100 leverage (112,530 ÷ 100) is collateral, released when the position closes. Swap accrues on the full $112,530 notional, not on the margin.

A round trip costs one full spread: half when the position opens and half when it closes, measured from the mid price, when the spread is the same at both ends. On raw-spread accounts EUR/USD spreads sit at an illustrative 0.1–0.3 pips, varying by broker. At 0.2 pips the cost on 1 standard lot is 0.2 × $10 = $2.00, since one pip on EUR/USD is worth $10 per standard lot on a USD account.

Around the 1.1253 mid, a 0.2-pip spread quotes 1.12529 bid and 1.12531 ask. The long buys at the ask, 1.12531. If the mid is unchanged at the exit, the position sells at the bid, 1.12529, and the 0.00002 gap on 100,000 euros is the $2.00: $1.00 crossed at entry and $1.00 at exit.

The spread is already inside those fill prices. A profit or loss worked from the actual entry and exit fills has paid it, so subtracting $2.00 again counts the spread twice. A separate spread line belongs only in a calculation that starts from mid prices, as the totals on this page do.

Fixed-spread accounts quote a set spread in normal conditions, an illustrative 1.5–2 pips on EUR/USD that varies by broker, and in this page's comparison they charge no commission. On 1 lot that is $15.00 to $20.00 per round trip. On a variable-spread account the spread paid is the one quoted at the moment of each fill, and variable spreads widen in thin hours and around data releases.

Commission is charged separately from the price, and brokers quote it either per side or per round turn. The example uses $3.50 per side per standard lot, which is $7.00 per round turn ($3.50 at entry and $3.50 at exit), an illustrative assumption rather than a market figure. A quote of $7 per lot can mean either basis, and the broker's commission schedule states which one applies.

A per-lot commission like this one scales with volume, not with price movement or holding time. On 0.50 lots the round turn is 0.50 × $7.00 = $3.50; on 3 lots it is $21.00. Some accounts deduct the whole round turn when the position opens and others charge each side as it happens; with a fixed per-lot commission in the account currency, the total is the same either way.

Which structure costs less on a given trade depends on the broker's actual figures and on the spread quoted at each fill, not on the account's name.

Swap on a forex position comes from the interest-rate gap between the pair's two currencies, applied to the full notional for each day of financing. A long EUR/USD position holds euros and owes dollars, so it earns the euro rate and pays the dollar rate. The example uses the euro deposit facility rate of 2.50% against 4.00%, the upper limit of the 3.75–4.00% US federal funds target range. Both currencies accrue on actual/360: interest for the actual number of days, on a 360-day year.

The short is the mirror image. It holds dollars and owes euros, so before any markup it is credited $4.69 a day and $32.82 over the same 7 days. The policy-rate gap is an approximation: it approximates the interbank tom-next forward points, and brokers add a markup set in their own terms.

With an illustrative markup of 0.5–1.5% a year in total, an assumption because markups vary by broker, applied once to the net differential, the long's rate widens to −2.0% to −3.0%. That is $6.25 to $9.38 per day of financing and $43.76 to $65.64 over the 7 days. The short's credit shrinks to 1.0% to 0.0%: $3.13 to $0.00 per day of financing, or $21.88 to $0.00 over the week.

A short's credit is not fixed income. A total markup larger than the 1.50-point rate gap makes both sides pay, swap tables move whenever a central bank changes its rate or the broker changes its markup, and one night's $4.69 credit equals less than half a pip of price movement on 1 lot ($4.69 ÷ $10 = 0.47 pips).

Day count by currency

EUR and USD money-market interest accrues on actual/360, which is why both legs of the EUR/USD example divide by 360. GBP and JPY accrue on actual/365, so on GBP/USD or USD/JPY each leg divides by its own basis before the two are netted.

Spot EUR/USD, like most currency pairs, settles two business days after the trade (T+2), and each rollover charges one day of swap for every calendar day the settlement date moves. Wednesday's rollover moves it from Friday to the following Monday, across the weekend, so Wednesday charges three days.

Seven days of financing for a position held seven calendar days is the general pattern for spot forex: the weekend is paid for on Wednesday, not on Saturday and Sunday. At brokers that follow the interbank settlement calendar, a bank holiday that settlement has to skip moves the extra days to a different rollover.

The Wednesday rule belongs to spot forex pairs that settle T+2. On index and commodity CFD positions the broker defines the charging days, and some apply the triple charge on Friday.

Each stage of the trade adds its own charge, and on this position the rollovers add the most. The table builds the total from mid prices, so the spread appears as its own line.

Measured from the mid price at entry, the long breaks even when EUR/USD has risen $41.82 ÷ $10 = 4.18 pips by the exit. On the fixed-spread structure, at 1.5–2 pips with no commission, the same week costs $15.00 to $20.00 plus the $32.82 of swap, or $47.82 to $52.82, with swap held at the same figure for the comparison.

On a USD account none of these figures needs converting. EUR/USD is quoted in dollars, so the spread and the swap arise in USD, and the commission in this example is stated in dollars too. On an account in another currency, each charge that arises in dollars converts at the rate the broker applies when it is booked: each rollover's swap at that rollover, and the spread, which sits inside the fill prices, with the trade's profit or loss at the close. At 1.1253, one night's $4.69 is €4.17.

A position size calculation that counts commission in the loss at the stop still leaves swap out. On a position held through several rollovers, the swap paid by the time the stop fills adds to that loss.

Spread and commission stay fixed per round trip, while swap grows with every day of financing. The rows hold the same 1-lot long, the $9.00 of illustrative spread and commission, and no markup.

Over three weeks the long's swap is nearly 11 times the spread and commission combined ($98.46 ÷ $9.00 = 10.94). With the illustrative 0.5–1.5% markup, the three-week swap is $131.29 to $196.93.

The short over the same three weeks is credited $98.46 before markup, which turns its total into a net credit of $89.46. With the markup the credit falls to $65.64 to $0.00, so the net result runs from a $56.64 credit to a $9.00 cost. That credit holds only while both rates and the broker's swap table stay where they are for the whole period.