Forex trading costs: spread and commission explained

A lower advertised spread does not always mean a cheaper trade. Compare the spread and the commission together, using the same currency pair, trade size and currency.

Checked: 7 October 2026 · FXJohn editorial guide. Examples below are hypothetical, not broker quotes or recommendations.

What is the spread?

The spread is the difference between the price at which you can buy and the price at which you can sell. It is a trading cost even when an account advertises no separate commission. Spreads can change with market conditions, so a minimum advertised spread is not a reliable estimate of what every trade will cost.

What is commission?

Commission is a separate trading charge. Check whether a broker quotes it for opening a position only, for each side, or for opening and closing combined. For example, $3.50 per side becomes $7 for a complete open-and-close trade at that quoted trade size.

A simple comparison

Assume a one-standard-lot EUR/USD trade in a USD account, with a pip value of $10. A pip is a small unit of price movement; its monetary value depends on the instrument, position size and account currency.

Example A: 1.2-pip spread and no separate commission: 1.2 × $10 = $12.
Example B: 0.2-pip spread and $7 commission to open and close: (0.2 × $10) + $7 = $9.

Example B costs $3 less under these assumptions. This does not establish which real account is better: execution, overnight funding, conversion and other charges can change the comparison.

At 0.1 standard lot, assuming both charges scale proportionally, the same examples become $1.20 and $0.90. Check for minimum commissions before scaling a broker’s quote.

Use one currency for every input

FXJohn’s calculator uses USD. If your account is in rand, do not mix a ZAR pip value with USD commission. Obtain consistent figures in one currency or apply a verified conversion first. A ZAR account does not automatically eliminate every conversion charge.

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What the calculation leaves out

Overnight funding: holding a position past a broker’s cutoff can result in a charge or credit. Check the applicable account, instrument, direction and rollover schedule.
Execution and slippage: the price at which an order fills may differ from the price you expected.
Currency conversion: deposits, withdrawals or trading adjustments may require conversion, depending on the account.
Other charges: check withdrawal, inactivity and any account-specific fees in the current terms.

Five questions before comparing accounts

Does the fee schedule apply to the exact company and account that will serve me?
Is commission quoted per side or for opening and closing together?
What spreads are typical during the hours I expect to trade?
What happens to costs if I hold a position overnight?
Are there minimum charges or conversion costs for my trade size and funding currency?

Sources and scope

The following primary sources explain pricing mechanisms. They cover specific overseas broker entities; their prices are not presented as offers available to South African readers. Always use the terms for your own account.

Risk information: Leveraged forex and CFDs involve substantial risk and can cause rapid losses. This guide provides general education, not personalised investment advice. It contains no affiliate links.