Forex spreads, commissions and swaps explained, with the numbers per lot

Three costs, three places to find them

Forex spreads, commissions and swaps explained properly is mostly an exercise in units. Brokers quote them in pips, points, dollars and percentages, often on the same page, and an Expert Advisor that looks profitable in one unit can be losing in another. This guide puts all three in the same terms: points and money per standard lot, so you can add them up.

A quick reminder on units. A point is the smallest price increment the broker quotes, so on a 5-digit EURUSD quote of 1.08453 one point is 0.00001. A pip is the traditional fourth decimal, 0.0001, so 10 points on a 5-digit quote. On a 3-digit JPY pair a pip is 0.01 and a point is 0.001. On a 2-digit gold quote a point is $0.01 per ounce. ConfirmedTrades reports execution in points and shows the digit count next to it for exactly this reason.

Spread: paid on every trade, twice a day in disguise

The spread is the gap between the bid and the ask. A buy fills at the ask and can only be closed at the bid, so the moment a trade opens it is behind by the spread. On a standard lot of EURUSD a point is worth $1, so a 12-point spread is $12 per lot per round trip; on a 0.1-lot trade, $1.20.

The number on the broker's website is usually the minimum or a quiet-hour average. What matters to an EA is the spread at the moment it trades. A typical raw feed on EURUSD might be 2 to 4 points through London and New York, 10 to 20 points in the hour around the daily rollover, and 50 or more for a few seconds on a major data release. A trading bot that trades the Asian session is paying three to five times what the broker's headline suggests.

The spread profile on a ConfirmedTrades account page comes from the live terminal: the connector samples the spread of the traded symbols every few seconds and the Execution quality section shows the distribution per symbol, including a by-hour view. That by-hour view is the single most useful thing to compare with your own broker, because it shows the cost at the times the EA actually trades rather than at the times the broker advertises.

Commission: the spread you can see

On a raw spread or ECN account the broker charges a commission instead of widening the spread. It is usually quoted per side per standard lot, so a headline of $3.50 means $7 per lot round trip. Some brokers quote per million of base currency traded, which for a EURUSD lot of 100,000 works out to the same kind of figure; some charge a percentage of notional, common on stock and index CFDs.

Converting to points makes commission comparable with spread. On EURUSD a point on one lot is $1, so $7 per lot round trip is 7 points. A 3-point raw spread plus 7 points commission is a 10-point round trip, which is about what a decent no-commission STP account charges in the spread. The difference is in the tails: the ECN account's cost rises when the spread widens, the STP account's rises by more because the mark-up is proportional.

On the trade history table, commission appears in the Comm. column when the owner exposes it, per trade, in account currency. It is already included in the net profit used for gain, drawdown and the Score, so there is nothing to subtract. What you want from the column is its size relative to the average winner.

Swap: the overnight interest nobody backtests

Swap is the financing charge or credit applied to a position held across the broker's daily rollover, usually at 00:00 server time. It comes from the interest-rate difference between the two currencies, plus the broker's margin. Buy a currency with a higher rate than the one you sell and the swap may be positive; the reverse is usually negative, and with the broker's cut, most pairs are negative in both directions.

Brokers quote it in points, in currency per lot, or as an annual percentage, and the sign is per direction. A long EURUSD swap of -7 points on a standard lot is roughly $7 per night; short might be +2 points. Gold and exotic pairs are far heavier: -$30 to -$50 per lot per night on a long gold position is not unusual. The swap cost calculator turns the broker's figure into a cost for your holding period and lot size.

Wednesday is the trap. Because spot forex settles two business days after the trade, a position held over Wednesday night is charged for the weekend, so the swap is tripled. An EA that opens on Wednesday afternoon and closes Thursday morning pays three nights for one. Some brokers apply the triple on Friday for certain instruments, and cryptocurrency CFDs usually charge seven days a week.

On a ConfirmedTrades record the swap appears in the Swap column of the trade table, per trade, and the Custom Analysis filter can include or exclude swaps so you can see how much of the strategy's result is financing. A forex robot that holds overnight with a big negative swap total relative to gross profit is fighting its own funding costs.

Swap-free accounts

A swap-free or Islamic account replaces the overnight swap with nothing, or with a flat administration fee after a grace period of a few days, or with a wider spread. For a swing EA that holds negative-swap positions for days, a genuine swap-free account can change the result materially. For a scalper it changes nothing except, sometimes, the spread.

Read the small print. Many brokers charge a daily fee per lot after three to seven days that can exceed the swap it replaces, restrict swap-free accounts to certain regions, or close them if the account is seen to be used purely to avoid financing on carry trades. The account type and base currency are shown on every verified page, but swap-free status is not a platform field; the evidence is a Swap column full of zeros on a strategy that holds overnight.

Adding it up for one trade

Take a 1-lot EURUSD long on a raw account held three nights including a Wednesday. Spread at entry 3 points, $3. Commission $7. Swap -7 points a night, tripled once: five nights' worth, $35. Expected slippage 1 point each way, $2. Total: $47, or 47 points, before the trade makes anything. An EA with a 60-point average winner has a cost ratio near 0.8 on this trade. The same trade closed within the day costs $12, and the ratio is 0.2.

That is why holding time is a cost decision, not just a strategy decision. The Activity and timing figures on the account page show average holding time and time in market, and the pip value calculator converts any of these point figures to your own lot sizes and account currency.

Related reading

The account type sets which of these costs dominates; see ECN vs STP vs market maker. For reading the costs off a specific record and comparing them with your own broker, broker cost audit is the step-by-step version.