Trading EducationWhat Is the Spread in Forex?
The spread in forex is the gap between the bid and the ask price. See what it costs, why it widens, and how to check it, on an interactive bid-ask chart.
Forex Spread vs Commission Compared
A raw-spread account looks cheaper until commission is added. Compare full trading cost by pair, lot size, and trade frequency.
A raw-spread account advertises a spread near zero. A standard account advertises "no commission." Read only the headline number and the raw account always looks cheaper. Add up what you actually pay on one trade and the answer depends on your pair, your lot size, and how often you trade, not on which number the broker put in bold.
About the author. Carlos Oliveira, I build trading tools for MetaTrader and run ForexTradingTools.eu. The figures below are worked examples with round numbers, not quotes from any specific broker. Check your own broker's account specification before you compare.
Contents
- The Cheapest-Looking Account Is Not Always the Cheapest Trade
- How Standard Accounts Price a Trade
- How Raw-Spread Accounts Price a Trade
- Compare the Full Round-Trip Cost
- Try It: The Account Cost Comparison
- Commission Per Side and Commission Per Round Trip
- When Spread Changes the Comparison
- When Holding Time Changes the Comparison
- How to Check Your Broker's Actual Pricing
- Frequently Asked Questions
The cheapest-looking account is not always the cheapest trade
Every broker prices a trade the same way underneath. You pay the bid-ask spread, and on some accounts a separate commission on top of it. The two pricing models just split that cost differently.
A standard account folds everything into the spread. A raw-spread (often called ECN or raw) account quotes a much thinner spread and charges the rest as a fixed commission per lot. Neither model is a discount. One bills you a wider gap between bid and ask; the other bills you a line item on your statement. The only number that tells you which is cheaper is the total.
How standard accounts price a trade
On a standard account, the broker's fee is already built into the spread you see quoted. There is no separate line item and nothing extra to calculate.
Standard-account spreads vary by broker, instrument, and session, so take the figure from your broker's own quote. As a worked example, assume a 1.2 pip EUR/USD spread. Using pip value for EUR/USD, one lot moves $10 per pip, so the spread costs:
1.2 pips × $10 per pip × 1.00 lot = $12.00
That $12.00 is the entire cost of the trade. It is not a fee charged at the open: the platform marks a new position at the opposite side of the quote, so the trade starts $12.00 down, and that gap is realised through the price you exit at.
How raw-spread accounts price a trade
A raw-spread account passes a much thinner spread through (assume 0.1 pips on EUR/USD for this example; your broker's live quote is what counts) and adds a fixed commission per lot to cover what the standard account's wider spread would otherwise pay for.
A common commission structure is $3.50 per lot per side, charged once on open and again on close. On the same EUR/USD trade, at a 0.1 pip spread and 1.00 lot:
Spread: 0.1 pips × $10 per pip × 1.00 lot = $1.00
Commission: $3.50 × 2 sides × 1.00 lot = $7.00
Total: $8.00
The spread portion barely registers. The commission is where most of the raw account's real cost lives, and it does not move with the market the way a spread does.
Compare the full round-trip cost
Put the two totals side by side on the identical trade, EUR/USD, 1.00 lot, one round trip:
| Account type | Spread cost | Commission | Total cost |
|---|---|---|---|
| Standard | $12.00 (1.2 pips) | $0.00 | $12.00 |
| Raw | $1.00 (0.1 pips) | $7.00 ($3.50 × 2 sides) | $8.00 |
On these example numbers the raw account is $4.00 cheaper. Recompute it on your own broker's actual spread and commission before you trust that gap. Both sides of the table move.
Try It: The Account Cost Comparison
The chart below builds the same ledger live: each bar is one round trip, and the raw bar stacks a thin spread underneath its commission so you can see how much of the raw total is commission.
One round trip, right now
1.00 lot of EUR/USD moves $10.00 per pip. Standard pays for the trade in spread alone. Raw splits it between a thinner spread and a commission.
EUR/USD and GBP/USD quote in USD. USD/JPY converts through the yen price.
1.00 lot is 100,000 units of the base currency.
Hypothetical input only. Replace it with your broker's quoted standard-account spread.
Hypothetical input only. Replace it with your broker's quoted raw-account spread.
Charged twice per round trip: once at open, once at close.
Commission chargedFind this word in your broker's account specification.
Spread costCommission
Raw total: $1.00 spread + ($3.50 × 2 sides × 1.00 lots) = $7.00 commission, $8.00 total.
- Standard account total
- $12.00
- Raw account total
- $8.00$1.00 spread + $7.00 Commission
- Cheaper on this trade
- Raw, by $4.00
Example numbers on a USD account. Recompute with your own broker's spread and commission before you trust the result.
Commission per side and commission per round trip
Brokers quote commission two different ways, and mixing them up is the easiest way to misjudge an account.
Per side means the commission is charged once on opening and again on closing: a $3.50 per lot per side commission costs $7.00 per round trip on 1.00 lot. Per round trip means the quoted number already covers both legs, so $7.00 per lot round trip also costs $7.00. A broker who just says "$3.50 commission" leaves you to guess which one. Guess wrong and the real cost comes out double.
Find the word "side" or "round trip" (sometimes "round turn") in the account specification before you compare. If it is not stated, ask your broker — NFA Compliance Rule 2-36 requires US forex dealers to disclose commission and mark-up on a per-trade basis, so the answer must be on record somewhere. The two readings differ by exactly a factor of two.
When spread changes the comparison
The comparison above assumed a 1.2 pip standard spread. That number is not fixed, and the gap between accounts shrinks as it moves.
With the same raw pricing (0.1 pips plus $7.00 commission on 1.00 lot, an $8.00 raw total), the standard account only needs to widen or narrow to change who wins:
- At a 0.8 pip standard spread, the standard total is $8.00. The two accounts tie.
- Below 0.8 pips, the standard account is cheaper. A broker running an unusually tight standard spread during peak London/New York liquidity can beat a raw account's fixed commission on that trade.
- Above 0.8 pips, the raw account is cheaper, and the gap widens as the standard spread widens further, for instance around news releases when spreads widen on every account type.
The commission does not move with the market. That is the real edge of a raw account. It does not spike when liquidity dries up, the way a standard spread does, and it will not always be the cheaper total either.
When holding time changes the comparison
Spread and commission are round-trip costs, charged once whether you hold a position for ten seconds or ten days. Holding time does not change the $4.00 gap in the example above.
What changes with holding time is swap, the overnight financing charge you pay for every night a position stays open. Ten nights held means ten nights of swap, on either account type, on top of the spread-and-commission total fixed the moment the trade opened. Spread and commission scale with how often you trade. Swap scales with how long you hold.
That split is why account choice matters most to trade frequency, not holding time. A scalper opening and closing 20 times a day multiplies the $4.00 gap by 20, an $80 daily difference between account types. A swing trader placing two trades a month multiplies it by two, an amount swap and the trade's own profit target dominate long before the account type does.
How to check your broker's actual pricing
Your broker's account specification page states the answer directly: it names the commission unit and billing basis, and your platform's live Market Watch shows the spread that formula actually runs on.
- Open your account type's specification page and find the account currency, commission unit, and whether commission is billed per side or per round trip.
- Watch the live spread on your platform's Market Watch, in your own trading hours, rather than trusting an advertised minimum. Turn the spread column on and note the number during a normal session, not once at a quiet moment.
- Multiply your typical lot size through both formulas above, spread cost and, if applicable, commission, using your own numbers instead of the ones on this page.
- Compare the two totals on the lot size and pair you actually trade. A comparison built on 1.00 lot EUR/USD tells you little about 0.05 lots of an exotic pair.
- Repeat the check periodically. Brokers change commission schedules and typical spreads without moving the account name.
There is no account type that wins every comparison. Run your own pair, lot size, and trade frequency through both formulas, and let the total decide, not the label on the account.
Frequently Asked Questions
Is commission charged per side or per round trip?
That one word changes the total by a factor of two: a $3.50 per-side commission is $7.00 per round trip on one lot, but a $3.50 per-round-trip commission stays at $3.50. Read the account specification for the exact wording, or ask your broker if it is not stated.
What is the typical spread during the hours I actually trade?
Not the advertised minimum during the tightest hour of the week. Watch the live spread on your own platform's Market Watch during your normal trading session, since that is the number your formula actually runs on.
Does the commission scale with lot size, or is it a flat fee?
Most brokers charge commission per lot, so it scales with trade size the same way spread cost does. Confirm this on your own account specification rather than assuming it.
How many round trips do I place in a typical week?
Frequency decides which account type wins: a scalper running fifty round trips a week multiplies a small per-trade gap into a large one, while a swing trader placing one trade barely feels it.
