Understanding Spread, Commission, and Broker Costs

The spread is the difference between the bid (sell) price and the ask (buy) price a broker quotes at any moment — it's the most immediate cost of entering a trade, since a position opens at a small paper loss equal to the spread before price has moved at all. Spreads vary by pair (majors are typically tighter than exotics), by broker, and by market conditions — spreads widen during low liquidity and around major news. Some brokers charge a separate, explicit commission per trade on top of a very tight (or even raw/interbank) spread, rather than building their margin entirely into a wider spread. Neither model is inherently cheaper — what matters is the total round-trip cost of a trade, spread plus commission, compared against the same total under the other model. This matters enormously for strategy selection. A scalping strategy that targets very small price moves many times a day needs a genuinely low total cost per trade to be viable at all — a few points of spread that would be irrelevant to a strategy holding positions for days can consume the entire expected profit of a scalp trade. A longer-horizon swing strategy, by contrast, can comfortably absorb a wider spread since it's a small fraction of the intended price move. There's also overnight financing (swap) to account for on any position held past the broker's daily rollover time — a cost or credit based on the interest rate differential between the two currencies in the pair, which compounds over time for positions held for extended periods. None of these costs individually look large on a single trade, but across hundreds or thousands of automated trades, they are a real, ongoing drag that any honest backtest and live performance review has to include.