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What is spread in forex? Bid, ask and the gap between them
Every forex quote is really two prices. The bid is the price at which the market will buy the base currency from you, so it is the price you sell at. The ask, also called the offer, is the price at which the market will sell the base currency to you, so it is the price you buy at. The ask is higher than the bid, and the gap between them is the spread.
The spread is how whoever makes the price is paid for standing ready to trade in both directions. On a standard, commission-free account it is also how your broker earns on the trade: the broker takes the prices it receives from its liquidity providers and adds a markup before showing them to you. On a raw-spread account the broker passes those prices through with little or no markup and charges a separate commission instead. Either way the spread is a cost you pay on every trade, whether the trade wins or loses.
Reading a two-way quote
Take an illustrative EUR/USD quote of 1.08501 / 1.08515. It is not a live price, just numbers to work with. The bid is 1.08501: if you sell one euro, you receive 1.08501 dollars. The ask is 1.08515: if you buy one euro, you pay 1.08515 dollars. The difference is 0.00014, which is 1.4 pips. On one standard lot of 100,000 euros that gap is worth 100,000 × 0.00014 = $14.
Why you pay the spread once per trade, not twice
A trade crosses the spread once over its life. A buy opens at the ask and closes at the bid; a sell opens at the bid and closes at the ask. If the price did not move at all between opening and closing, you would lose exactly the spread. That is why a new position shows a small loss the instant it opens. The loss is not slippage and it is not a platform error: a long position is valued at the bid you could close it at, and the gap between that bid and the ask you paid is the spread, shown as unrealised profit and loss.
It follows that the spread counts against every strategy at the same rate, long or short. One round turn, meaning one open and one close, costs one spread. A strategy that makes 200 round turns a month pays 200 spreads a month, and its edge has to cover all of them before it earns anything.
The chart shows only half the quote
MetaTrader charts plot the bid by default. Buy orders fill at the ask, and the stop-loss on a short position is a buy order, so it triggers when the ask reaches it. When the spread widens, the ask can touch a short's stop while the bid line on the chart never gets there. It is a common reason traders believe their stop was deliberately hunted. Before you conclude that, our article on stop-loss hunting sets out how to check a suspicious spike against independent price feeds. Turning on the ask line in the chart properties makes the problem visible before it costs you.
How to measure a spread in pips
A pip is the standard unit of price movement in forex. For most pairs it is the fourth decimal place, 0.0001. For pairs quoted in Japanese yen it is the second decimal place, 0.01. Most brokers now quote one extra decimal, five places on EUR/USD and three on USD/JPY, and that extra digit is a fractional pip, or pipette, worth one tenth of a pip.
To measure a spread, subtract the bid from the ask and divide by the pip size. On the EUR/USD quote above that is (1.08515 − 1.08501) ÷ 0.0001 = 1.4 pips. On an illustrative USD/JPY quote of 156.402 / 156.419 it is (156.419 − 156.402) ÷ 0.01 = 1.7 pips.
Why MetaTrader shows "14" when the spread is 1.4 pips
In MetaTrader 4 and MetaTrader 5, the Spread column in Market Watch is measured in points, the smallest increment in which the symbol is quoted. On a five-digit EUR/USD a point is 0.00001, a tenth of a pip, so a spread displayed as 14 is 1.4 pips. On a three-digit USD/JPY a displayed 17 is 1.7 pips. Divide by ten before you compare the number with a broker's published figure, which is normally quoted in pips. Traders who skip that step conclude their broker's spread is ten times what was advertised, or, worse, compare a points figure at one broker with a pips figure at another.
| Pair | Pip size | Fractional pip | 1 pip on 1 standard lot | Value in US dollars |
|---|---|---|---|---|
| EUR/USD | 0.0001 | 0.00001 | $10 | $10, fixed |
| GBP/USD | 0.0001 | 0.00001 | $10 | $10, fixed |
| AUD/USD | 0.0001 | 0.00001 | $10 | $10, fixed |
| EUR/GBP | 0.0001 | 0.00001 | £10 | Moves with GBP/USD |
| USD/CHF | 0.0001 | 0.00001 | CHF 10 | Moves with USD/CHF |
| USD/CAD | 0.0001 | 0.00001 | CAD 10 | Moves with USD/CAD |
| USD/JPY | 0.01 | 0.001 | ¥1,000 | Moves with USD/JPY |
| USD/ZAR | 0.0001 | 0.00001 | ZAR 10 | Moves with USD/ZAR |
The rule behind the table is that pip value is always fixed in the quote currency, the second currency in the pair, because a pip is a fixed amount of that currency multiplied by a fixed number of units. It only changes when you convert it into your account currency. A mini lot of 10,000 units is worth a tenth of the figures above, and a micro lot of 1,000 units a hundredth. The full arithmetic, including conversion into your account currency, is in our guide to pips, lots and position sizing.
What a spread costs in money
The cost of a spread per round turn is the spread in pips, multiplied by the pip value, multiplied by the number of lots. For every pair quoted in US dollars, including EUR/USD, GBP/USD, AUD/USD and NZD/USD, one pip on one standard lot is $10, so the table below needs no exchange rate at all.
| Spread | 0.01 lot (micro) | 0.10 lot (mini) | 0.50 lot | 1.00 lot (standard) |
|---|---|---|---|---|
| 0.5 pips | $0.05 | $0.50 | $2.50 | $5.00 |
| 1.0 pips | $0.10 | $1.00 | $5.00 | $10.00 |
| 1.4 pips | $0.14 | $1.40 | $7.00 | $14.00 |
| 2.0 pips | $0.20 | $2.00 | $10.00 | $20.00 |
| 3.0 pips | $0.30 | $3.00 | $15.00 | $30.00 |
| 5.0 pips | $0.50 | $5.00 | $25.00 | $50.00 |
Two things follow from the table. First, the cost scales in a straight line with size: a spread that feels trivial on a micro lot is $10 or more on a standard lot, on every trade. Second, the spread is charged on the size of the position, not on the amount of your own money behind it. That distinction matters a great deal once leverage enters, and we return to it below.
The same cost in rand, naira, shillings and dirhams
South Africa. USD/ZAR is priced in rand, so a pip on one standard lot is ZAR 10 whatever the exchange rate happens to be. Take an illustrative quote of 18.1500 / 18.1600, which is neither a live price nor a claim about typical USD/ZAR spreads. The spread is 0.0100, or 100 pips. At ZAR 10 a pip, one standard lot costs ZAR 1,000 to open and close, 0.10 lot costs ZAR 100 and 0.01 lot costs ZAR 10.
That example also shows why pip counts mislead across pairs. A 100-pip spread sounds enormous next to 1.4 pips on EUR/USD, but a USD/ZAR pip is worth far less in dollars than a EUR/USD pip. The fair comparison is the spread as a share of the price. For the EUR/USD quote, 0.00014 ÷ 1.08508 is about 0.013%. For the USD/ZAR quote, 0.0100 ÷ 18.155 is about 0.055%. On these illustrative numbers the rand pair costs a little over four times as much per dollar traded, not the seventy times the pip counts suggest.
Nigeria and Kenya. A trader in Lagos or Nairobi who funds a US-dollar account pays the spread in dollars and feels it in naira or shillings. At an illustrative rate of 1 USD = 1,500 NGN, a 1.4-pip spread on 0.10 lot of EUR/USD, which is $1.40, costs ₦2,100, and on a full standard lot, $14, it costs ₦21,000. At an illustrative rate of 1 USD = 130 KES the same two trades cost KES 182 and KES 1,820. Both currencies move against the dollar, so use today's rate for your own figures.
United Arab Emirates. The dirham is pegged to the US dollar at 3.6725, so for a trader in Dubai the conversion does not move: the $14 spread on a standard lot is about AED 51.42.
One cost sits outside all of these tables: converting your deposit. If you fund a dollar account in naira, shillings or cedis, the bank, card scheme or payment agent converts at its own rate, and that rate carries its own spread against the mid-market rate. You pay it on the way in and again on the way out. Compare the rate you are given with the mid-market rate on the day to see what it is costing you.
What the spread does to a small account
Because the spread is a fixed cost per lot, its weight depends on the size of the account paying it. The table expresses a 1.2-pip EUR/USD spread as a share of four account sizes.
| Account size | 0.01 lot per trade ($0.12) | 0.10 lot per trade ($1.20) | 0.10 lot, 40 trades a month ($48) |
|---|---|---|---|
| $50 | 0.24% | 2.4% | 96% |
| $100 | 0.12% | 1.2% | 48% |
| $500 | 0.024% | 0.24% | 9.6% |
| $1,000 | 0.012% | 0.12% | 4.8% |
A $100 account trading mini lots forty times a month hands almost half its balance to the spread before a single trade has to be wrong. That arithmetic is part of why small, very active accounts fail, and it connects directly to why most retail traders lose money. The fix is position size, not a better entry: at 0.01 lot the same forty trades cost 40 × $0.12 = $4.80, or 4.8% of a $100 account.
Fixed vs variable spreads
A fixed spread stays at the same number of pips whatever the market is doing. A variable spread, also called a floating spread, moves with the prices the broker receives: tight when liquidity is deep, wider when it thins. The difference comes down to who carries the risk of that change.
A broker can only promise a fixed spread if it is setting the price itself, which means acting as a market maker and taking the other side of your trade. It absorbs the gap between what the interbank market is doing and what it shows you, and it prices that risk into a fixed spread that is generally set wider than a variable spread on the same pair in normal conditions. A variable spread passes market conditions straight through to you. It is usually tighter for most of the day and wider exactly when you would least like it to be.
| Feature | Fixed spread | Variable spread |
|---|---|---|
| Who usually offers it | Dealing-desk (market-maker) brokers | STP and ECN brokers, and every account in our data for the six brokers we review |
| Spread in liquid hours | Generally wider than a variable spread on the same pair | Tighter; this is where published "from" figures come from |
| Spread during news or at rollover | Unchanged on paper | Widens, sometimes sharply |
| What happens in fast markets | Requotes, rejected orders or delayed fills become more likely | Orders fill, but at the wider spread and with slippage |
| Cost predictability | High: you know the cost before you trade | Lower: you know the cost only at the moment you trade |
| Best suited to | Traders who value a known cost and accept paying more for it | Traders who can avoid the wide windows |
In FxReviewLab's own account data for the six brokers we review, every forex account is published as a "spread from" figure, a floor the spread can reach rather than a number it holds, which is the language of variable pricing. None of them is listed as a fixed-spread account.
What a fixed spread does not protect you from
A fixed spread fixes the gap between bid and ask. It does not fix the price you get. When the market moves faster than a dealing desk is willing to quote, the protection usually shows up as a requote ("price changed, accept the new price?") or a rejected order, and when the market gaps the whole fixed-spread quote simply jumps to the new level. Read the account terms as well: fixed-spread agreements often reserve the right to widen spreads or stop quoting in abnormal market conditions, which are precisely the conditions a fixed spread was supposed to cover.
Which should you choose?
If you trade a few times a week during the London session or the London–New York overlap and stay flat through major releases, a variable spread will usually cost you less, because you are trading in exactly the conditions where it is tightest. If your trading clusters around news, or you trade the thin hours, a fixed spread's predictability has real value, but you pay for it on every trade, including the quiet ones. If your trading can fit the first pattern, you are better served by learning when not to trade than by paying for insurance against it.
When and why spreads widen
A variable spread is a live measure of liquidity. It widens whenever fewer participants are quoting, or when those quoting want a bigger cushion against a sudden move. It does so in four recurring situations.
Session changes and thin hours
Spreads on a pair are tightest when its home financial centres are open: EUR/USD and GBP/USD during the London session and the London–New York overlap, USD/JPY during the Tokyo session, and USD/ZAR during the London session, when South African and London desks are working at the same time. Spreads widen as those centres close and stay wider until the next one opens. For the majors, the quietest stretch of the day is the gap after New York closes and before Tokyo is fully active. Our forex trading sessions guide sets out every session in WAT, SAST, EAT, GST and GMT, for both halves of the year.
Scheduled news
In the minutes before a major release, liquidity providers pull or widen their quotes rather than be caught on the wrong side of the number, and the spread you see widens with them. It normally narrows again soon after the release, but after a genuine surprise it can stay wide for longer. US non-farm payrolls, normally published on the first Friday of the month at 08:30 New York time, lands at 12:30 UTC while the US is on daylight time and at 13:30 UTC in the northern winter. That is 13:30 or 14:30 WAT, and 15:30 or 16:30 EAT. CPI releases and central-bank rate decisions, the FOMC statement among them, have the same effect. Our guide to the economic calendar and news events covers how to read the schedule, and the BLS release schedule is the primary source for the payrolls and CPI release dates.
The daily rollover at 17:00 New York time
At 17:00 New York time the forex market rolls to the next value date. Liquidity providers roll their books, many step back from quoting for a short period, and retail spreads widen: noticeably on the majors, and by more on crosses and exotic pairs. It is also when swap, the overnight financing charge or credit, is applied to any position held across it. For currency pairs most brokers apply three days' swap at the Wednesday rollover to cover the weekend. Many MetaTrader servers set their clock so that 17:00 New York is midnight server time, which is why the widening tends to appear right around the close of the daily candle.
| New York clock | UTC | Ghana (GMT) | Nigeria (WAT) | South Africa (SAST) | Kenya and Tanzania (EAT) | UAE (GST) |
|---|---|---|---|---|---|---|
| EST, early November to mid-March | 22:00 | 22:00 | 23:00 | 00:00 | 01:00 | 02:00 |
| EDT, mid-March to early November | 21:00 | 21:00 | 22:00 | 23:00 | 00:00 | 01:00 |
For a trader in Johannesburg or Nairobi the rollover falls around midnight, which is exactly when a tired trader is tempted to open one last position. Two rules cover it. Do not open a new trade in the window either side of the rollover. And do not leave a tight stop exposed to it, especially on a short position, whose stop is triggered by the ask.
Weekends, holidays and the Monday open
Liquidity drains out of the market into the Friday close. The first hour after the weekly open, which is late Sunday evening in West Africa and the early hours of Monday in East Africa and the Gulf, is thin: spreads are wide and prices can open well away from Friday's close. A public holiday in London or New York thins that centre's pairs for the day, and the stretch between Christmas and New Year is the thinnest of the year.
What is an ECN broker? ECN, STP and market makers compared
An ECN broker routes your orders into an electronic communication network, where they are matched against prices streamed by several liquidity providers, such as banks and non-bank market makers, rather than being filled by the broker from its own book. You see the best bid and ask available in that pool, the spread is whatever the pool produces at that moment, and the broker earns a commission per lot instead of a markup in the spread.
ECN is one of three broad execution models used by retail brokers. The labels overlap in marketing, so it helps to define them by a single question: who takes the other side of your trade?
- Market maker (dealing desk, or "B-book"). The broker is your counterparty. It quotes its own prices, fixed or variable, and earns from the spread and, because it sits on the other side, from client losses on trades it keeps. That is a conflict of interest, which regulators require firms to manage, but it is not improper in itself: under EU and UK rules a market maker still owes you best execution.
- STP (straight-through processing, or "A-book"). The broker passes your order to one or more liquidity providers and fills you at their price, usually with a markup built into the spread. A typical STP account charges no commission.
- ECN. Access to a pool of several liquidity providers, a raw spread and a commission per lot.
In practice many large retail brokers run a hybrid, routing some client flow to liquidity providers and keeping the rest, and the mix can differ by client, account type and instrument.
| Question | Market maker | STP | ECN |
|---|---|---|---|
| Who takes the other side? | The broker | A liquidity provider the broker routes to | Whichever participant in the pool shows the best price |
| How is the broker paid? | Spread, plus client losses on trades it keeps | Markup inside the spread | Commission per lot, little or no markup |
| What spread do you see? | Fixed or variable, wider | Variable, marked up | Variable, raw |
| Is there a commission? | Usually not | Usually not | Yes, per lot |
| What goes wrong in fast markets? | Requotes and rejections | Slippage | Slippage, and raw spreads widen |
| What should you check? | How the conflict of interest is managed | Size of the markup | Commission basis and spread in thin hours |
Account names are not proof of execution
"ECN", "Raw", "Razor", "Zero" and "STP" are account names, and account names are chosen by marketing departments. They reliably tell you the pricing structure, spread-only or raw spread plus commission, but not how every order is routed. A broker can offer a raw-plus-commission account and still keep a share of that flow in house. The document that tells you is the order execution policy, which EU- and UK-regulated firms must make available to clients; for an offshore entity, check whether it publishes one at all. The other check is regulatory: confirm the entity that holds your account on the regulator's own register, following the steps in how to verify a broker.
Slippage is part of the cost too
On any variable-spread model your order is filled at the best available price when it reaches the market, which may be better or worse than the price on screen when you clicked. The difference is slippage. It appears in no broker's published spread, and it is largest in exactly the conditions in which spreads widen. On a market order on a major pair in liquid hours it is usually negligible; on a stop order during a release it can be larger than the spread itself.
Raw-spread vs standard accounts: comparing on an all-in cost basis
A standard account builds the broker's revenue into the spread and charges no commission. A raw-spread account shows a much tighter spread and charges a commission per lot. You cannot compare the two on the spread alone, because a 0.0-pip spread with a commission is not free, and you cannot compare them on the commission alone either. Convert both into the same unit.
All-in cost per round turn, in pips = spread + (round-turn commission ÷ pip value per lot).
For pairs quoted in US dollars the pip value is $10 per standard lot, so a $7 round-turn commission adds 0.7 pips and a $6 one adds 0.6 pips. Once both accounts are in pips, or both in dollars per lot, the comparison is direct.
Commission per side vs per round turn
Brokers express commission in different ways: per lot per side, charged once when you open and again when you close; per round turn, covering the open and the close together; or per million units traded. The difference between the first two is a factor of two. "$3.50 per lot per side" is $7 for a round turn on one lot; "$3.50 per round turn" is half that. A rate of $35 per million per side works out at $3.50 per standard lot per side, because a standard lot is a tenth of a million. Before comparing two accounts, convert both into round-turn dollars per standard lot.
The break-even between the two account types
A raw account is cheaper whenever its spread is lower than the standard account's spread by more than the commission expressed in pips. With a $7 round-turn commission, worth 0.7 pips, the raw account wins while the standard spread minus the raw spread is greater than 0.7 pips. If a broker's standard account is running at 1.2 pips while its raw account runs at 0.2, the gap is 1.0 pip and the raw account saves 0.3 pips, or $3 per standard lot, on every round turn. If the raw spread widens to 0.5 pips, the gap shrinks to 0.7 and the two cost exactly the same.
The comparison only works if both spreads are measured on the same pair at the same time. Setting one account's published minimum against the other's typical spread makes either account look better than it is, depending on which way round you do it.
Account types at the six brokers we review
The table sets out every forex account type in FxReviewLab's published data for the six brokers we review, with the all-in figure worked out using the formula above. Read the caption before the numbers: these are the brokers' own published "from" figures, the lowest spread each account can show, not averages we have measured. A spread "from 0.0 pips" spends much of the day above zero, and a standard account "from 1.0 pips" is quoting its floor, not its norm.
| Broker | Account | Spread from | Commission | All-in from, per round turn | Minimum deposit |
|---|---|---|---|---|---|
| Exness | Standard | 0.3 pips | None | 0.3 pips | $1 |
| Exness | Standard Cent | 0.3 pips | None | 0.3 pips | $1 |
| Exness | Raw Spread | 0.0 pips | $3.50 per lot | See note below | $200 |
| Exness | Zero | 0.0 pips | From $0.05 | No single figure | $200 |
| Exness | Pro | 0.1 pips | None | 0.1 pips | $200 |
| HFM | Cent | 1.2 pips | None | 1.2 pips | $0 |
| HFM | Premium | 1.2 pips | None | 1.2 pips | $0 |
| HFM | Pro | 0.5 pips | None | 0.5 pips | $100 |
| HFM | Zero Spread | 0.0 pips | $3 per lot per side | 0.6 pips ($6) | $200 |
| IC Markets | Standard | 1.0 pips | None | 1.0 pips | $200 |
| IC Markets | Raw Spread (MT4 and MT5) | 0.0 pips | $3.50 per lot per side | 0.7 pips ($7) | $200 |
| IC Markets | Raw Spread (cTrader) | 0.0 pips | $3.00 per lot per side | 0.6 pips ($6) | $200 |
| Pepperstone | Standard | 1.0 pips | None | 1.0 pips | $0 (no minimum) |
| Pepperstone | Razor (MT4 and MT5) | 0.0 pips | $3.50 per lot per side | 0.7 pips ($7) | $0 (no minimum) |
| Pepperstone | Razor (cTrader) | 0.0 pips | $3.00 per lot per side | 0.6 pips ($6) | $0 (no minimum) |
| Vantage | Standard STP | 1.0 pips | None | 1.0 pips | $50 |
| Vantage | Cent (Pro+) | 1.0 pips | None | 1.0 pips | $50 |
| Vantage | Raw ECN | 0.0 pips | $3 per lot per side | 0.6 pips ($6) | $50 |
| Vantage | Pro ECN | 0.0 pips | $1.50 per lot per side | 0.3 pips ($3) | $10,000 |
| XM | Standard | 1.0 pips | None | 1.0 pips | $5 |
| XM | Micro | 1.0 pips | None | 1.0 pips | $5 |
| XM | Ultra Low | 0.6 pips | None | 0.6 pips | $50 |
| XM | XM Zero | 0.0 pips | $3.50 per lot per side | 0.7 pips ($7) | $5 |
Note on Exness. Our Exness data records the Raw Spread commission as $3.50 per lot without stating whether that is charged per side or per round turn, so we have not converted it. Read per side, it would add 0.7 pips; read per round turn, 0.35 pips. Check the contract specification for your Exness entity before comparing it with the accounts above. The Zero account quotes its commission "from $0.05", which is a floor rather than a rate, so it has no single all-in figure. XM's Shares account is left out of the table because it is for share trading, not forex.
What the table shows, and what it cannot
On "from" figures the raw-plus-commission accounts at HFM, IC Markets, Pepperstone, Vantage and XM land at 0.6 to 0.7 pips all-in, Vantage Pro ECN aside, against 1.0 to 1.2 pips for the same five brokers' standard accounts. Within each broker that is a saving of 0.3 to 0.6 pips, or $3 to $6 per standard lot per round turn. Several commission-free accounts sit in between or below: HFM Pro at 0.5 pips, XM Ultra Low at 0.6, and Exness Standard and Pro at 0.3 and 0.1. Vantage Pro ECN carries the lowest flat commission in the table, 0.3 pips all-in, but needs a $10,000 deposit. Exness breaks the usual pattern: its commission-free Standard account's 0.3-pip floor is below the Raw Spread account's all-in floor on either reading of its commission, 0.35 or 0.7 pips, so at Exness the raw account does not win even on published figures.
What the table cannot tell you is which account is cheapest in practice. Each "from" figure is the best moment of a different account, and a standard account and a raw account do not sit at their floors at the same times or for the same share of the day. Treat the table as a shortlist and your own measurements as the decision. To measure, open the Spread column in Market Watch on the account you are considering, note the spread on your pair at the times you actually trade, three fixed times a day for a week is enough, divide the points by ten and average them. Do the same on both account types if you are choosing between them, then run the formula. Demo price feeds can differ from live ones, so a small live account gives the truer reading.
Check which entity you are signing with
Spreads, commissions and leverage can all differ between the entities of one brand, so confirm which one holds your account before you compare anything. In our data, Exness (FSP 51024), HFM (FSP 46632) and Vantage (FSP 51268) hold South African FSCA licences, and Pepperstone (F004356) and XM (F003484) hold DFSA licences in Dubai; holding a local licence does not by itself mean your account is opened with that entity. Many traders elsewhere in Africa are onboarded by an offshore entity instead, and the offshore licences in our data are in Seychelles, Belize, the Cayman Islands and Vanuatu, with higher leverage and less recourse. None of the six is registered with Nigeria's SEC, so a Nigerian account sits with an entity licensed abroad. The name of the entity is on your client agreement; check it against the regulator's register.
Licence details verified against each regulator’s own public register — the same check recorded on our broker reviews.
Worked example: a month of trading on two account types
A trader in Nairobi trades EUR/USD in the London–New York overlap, 0.20 lots per trade, 60 round turns a month: three a day over twenty trading days. She is choosing between a standard account and a raw account at the same broker. The spreads below are assumptions for the arithmetic, not measured or published figures: the standard account averages 1.2 pips during her hours, and the raw account averages 0.2 pips plus a commission of $3.50 per lot per side, which is $7 per lot round turn.
- Standard account. 0.20 lots × 1.2 pips × $10 = $2.40 per trade. Over 60 trades, $144.
- Raw account, spread. 0.20 lots × 0.2 pips × $10 = $0.40 per trade.
- Raw account, commission. 0.20 lots × $7 = $1.40 per trade.
- Raw account, all-in. $0.40 + $1.40 = $1.80 per trade. Over 60 trades, $108.
| Scenario | Spread cost | Commission | Total per month | Per trade |
|---|---|---|---|---|
| Standard, 1.2 pips average | $144 | $0 | $144 | $2.40 |
| Standard, 1.0 pips average | $120 | $0 | $120 | $2.00 |
| Raw, 0.2 pips average + $7 round turn | $24 | $84 | $108 | $1.80 |
| Raw, 0.5 pips average + $7 round turn | $60 | $84 | $144 | $2.40 |
On the central assumptions the raw account saves $36 a month, a quarter of the standard account's cost. At an illustrative rate of 1 USD = 130 KES, that is KES 18,720 against KES 14,040, a saving of KES 4,680 a month; use today's rate for your own numbers. The last row is the important one: if the raw account's average spread in her hours is 0.5 pips rather than 0.2, the saving disappears entirely, because 0.5 + 0.7 = 1.2 pips, exactly the standard account's cost. The whole decision rests on the average raw spread at the times she trades, which is why measuring it matters more than any published figure.
Timing can matter as much as the account. Suppose, again as an assumption, that the spread at the 17:00 New York rollover is 5 pips. One trade of 0.20 lots opened into it costs 0.20 × 5 × $10 = $10, more than four ordinary trades on the standard account.
Why high leverage makes the same spread weigh more
ESMA and the FCA cap retail leverage at 30:1 on major currency pairs and 20:1 on non-major pairs, gold and major indices. Offshore entities are not bound by those caps, and many African traders are onboarded by exactly those entities. The maximum leverage recorded in our reviews runs from 1:500 at Pepperstone and Vantage, through 1:1000 at IC Markets and XM and 1:2000 at HFM, to "unlimited" on Exness's Pro entity.
Leverage does not change the spread. It changes how large a position a given deposit can open, and the spread is charged on that position. The table holds the spread constant at 1.0 pip on one standard lot of EUR/USD at an illustrative price of 1.0850, a position worth $108,500, and shows what that $10 represents against the margin the position ties up.
| Leverage | Where it applies | Margin for 1 lot | Spread cost | Spread as % of margin |
|---|---|---|---|---|
| 1:30 | ESMA and FCA retail cap on major pairs | $3,616.67 | $10 | 0.28% |
| 1:500 | Maximum in our data for Pepperstone and Vantage | $217.00 | $10 | 4.61% |
| 1:1000 | Maximum in our data for IC Markets and XM | $108.50 | $10 | 9.22% |
| 1:2000 | Maximum in our data for HFM | $54.25 | $10 | 18.43% |
Put a $200 deposit through the same arithmetic. At 30:1 it supports $6,000 of EUR/USD, 0.05 lot at the illustrative price, and a 1.0-pip spread on that is $0.50, or 0.25% of the deposit. At 1:500 the same $200 supports 0.92 lot. Open that and the spread alone costs $9.20, 4.6% of the account, and free margin is already below zero before the price has moved a single pip. High leverage lets a small account pay a large account's spread. Our guide to leverage, margin and lot size covers how margin calls and stop-outs work; the levels at which they trigger differ by broker and entity, so check yours.
How to pay less spread
- Trade your pair's liquid hours. For the majors that is the London session and the London–New York overlap; for USD/ZAR it is the London session.
- Stay flat through the rollover and the big releases. Neither entering nor holding a tight stop through either window is worth it.
- Compare accounts all-in, in money per lot, measured at the same time. Headline spread and headline commission are each half of the cost.
- Size positions so the spread is small against your target. A 1.2-pip spread is 12% of a 10-pip target but 2% of a 60-pip one. Short-target strategies need the cheapest execution; longer-target strategies can afford a standard account.
- Check the commission basis. Per side or per round turn is a factor of two.
- Turn on the ask line. A short's stop is hit by the ask, not by the bid the chart draws.
- Verify the entity. The account terms that decide your costs belong to the entity on your client agreement, not to the brand.
Frequently asked questions
What is spread in forex in simple terms?
It is the difference between the price you can buy a currency pair at, the ask, and the price you can sell it at, the bid. You pay it once on every trade, across the open and the close. If EUR/USD is quoted 1.08501 / 1.08515, the spread is 1.4 pips, which is $14 on one standard lot.
How do I calculate the cost of a spread?
Multiply the spread in pips by the pip value and by the number of lots. On pairs quoted in US dollars one pip on a standard lot is $10, so a 1.2-pip spread on 0.10 lot costs 1.2 × $10 × 0.10 = $1.20 per round turn. Add any commission to get the all-in cost.
Is a 1 pip spread good?
On a major pair and a commission-free account, 1.0 pip is the published "from" figure for the standard accounts at IC Markets, Pepperstone, Vantage and XM in our data, so it is a floor rather than a bargain. On a raw-spread account the fair comparison is spread plus commission: 0.0 pips plus $3.50 per lot per side works out at 0.7 pips all-in.
Which is better, fixed or variable spreads?
For most traders who trade liquid hours and avoid news, a variable spread costs less, because it is tightest exactly when they trade. A fixed spread buys predictability, but it is generally set wider, and in fast markets it tends to come with requotes or rejected orders rather than a guaranteed fill.
What is an ECN broker?
An ECN broker routes your orders to a network where they are matched against prices from several liquidity providers, instead of filling them from its own book. You see a raw spread and pay a commission per lot. The account name alone does not prove the routing: read the broker's order execution policy, and confirm the entity holding your account on its regulator's register.
Are raw spread accounts cheaper than standard accounts?
Not automatically. A raw account wins only when its spread is lower than the standard account's by more than the commission in pips. With $7 per lot round turn that gap has to exceed 0.7 pips at the times you trade. Even on published figures it does not always hold: in our data, Exness's commission-free Standard account starts at 0.3 pips, below its Raw Spread account's all-in figure. Measure both before you switch.
Why does my spread widen at night?
Most likely you are trading into the 17:00 New York rollover, when liquidity providers roll their books and spreads widen. That is 23:00 WAT, 00:00 SAST, 01:00 EAT and 02:00 GST while New York is on winter time, and one hour earlier from mid-March to early November. The thin hours after New York closes add to it.
Does the spread count as a loss when I open a trade?
Yes. A new position is valued at the price you could close it at, so a buy opened at the ask is immediately marked at the lower bid. The small loss you see the moment a trade opens is the spread, not slippage or an error.
How much is one pip worth on USD/ZAR?
ZAR 10 on one standard lot of 100,000 US dollars, ZAR 1 on a mini lot and ZAR 0.10 on a micro lot. Because the pair is quoted in rand, those values do not depend on the exchange rate. Converting them into US dollars does.
Can a forex spread be zero?
Momentarily, on a raw-spread account, when the best bid and best ask in the pool meet. That is what "from 0.0 pips" advertises. It is a minimum, not a typical spread, and you still pay the account's commission, so the all-in cost of the trade is not zero.
How do I compare spreads between two brokers fairly?
Measure the spread on the same pair at the same times on both accounts, convert any commission into pips per round turn, and add them together. Comparing one broker's advertised minimum with another broker's typical spread, or a MetaTrader points figure with a pips figure, will give you the wrong answer.
