The three costs: spread, commission, swap
What you learn in 3 minutesThis lesson shows the three costs you pay on a trade: the spread when you enter, commission on some account types, and swap for every night a position stays open. On one standard lot of EUR/USD, the spread and commission alone can come to about ₱1,100 before the price has moved in your favour.
One standard lot of EUR/USD: about ₱1,100 on entry and exit
| Step | Amount | Note |
|---|---|---|
| Spread | 1.2 pips | The gap between the bid and the ask on the chart. |
| Value of one pip on one standard lot | ₱10 | 100,000 x 0.0001 = 10 units of the quote currency, converted at the current rate. The rate varies between brokers and over time. |
| Spread cost | ₱12 | 1.2 pips x ₱10 per pip. |
| Commission | ₱7 | A round-turn commission of about $7 on some account types, converted to pesos. This varies between brokers and account types. |
| Total on entry and exit | ₱19 | ₱12 spread + ₱7 commission. Swap is extra if you hold the position overnight. |
The broker may round the spread, charge commission per side rather than round turn, and add swap for each night the position is open. Check the contract specifications.
The mistake people make here
A common mistake is to look only at the spread and forget commission and swap. On a small trade, commission can be a large part of the total cost. Instead, add up all three before you enter. If you plan to hold for several days, ask what the swap is for each night. That way you know the full cost before the trade, not after.Check yourself
If the spread is 1.2 pips and one pip on one standard lot is ₱10, what is the spread cost?
1.2 x ₱10 = ₱12.
If the spread cost is ₱12 and the round-turn commission is ₱7, what is the total cost on entry and exit?
₱12 + ₱7 = ₱19.
If you hold the position for three nights and the swap is ₱5 per night, what is the total swap cost?
3 x ₱5 = ₱15.