Understanding Trading Costs

Types of Trading Costs

Every forex trade involves costs that eat into your profits. Understanding and minimizing these costs is essential for long-term success.

Spreads

The spread is the difference between the bid and ask price. For EUR/USD, typical spreads range from 0.1 to 2 pips depending on your broker and market conditions.

Commissions

Some brokers charge commissions per trade instead of or in addition to spreads. ECN brokers typically offer lower spreads but charge a commission.

Swap/Overnight Fees

Holding positions overnight incurs swap fees based on interest rate differentials. These can be positive or negative depending on your position direction.

Calculating True Costs

Add up all costs: spread + commission + potential swap fees. Compare total costs across brokers before choosing one. Lower costs directly improve your bottom line.