Most traders know their entry, their stop and their target. Far fewer know what each trade actually costs them. But costs come out of every trade, winners and losers alike, and for active traders they can decide whether a strategy makes money at all.
Here are the three main costs of trading forex, the daily rollover most beginners learn about the hard way, and a simple way to work out what you’re really paying.
1. The spread
The spread is the difference between the buy (ask) price and the sell (bid) price. You buy at the higher price and sell at the lower one, so every trade starts slightly in the red.
On a major pair like EUR/USD, spreads are usually tight, often a fraction of a pip to one pip during busy hours. On less traded pairs, gold, or indices, they can be much wider.
Spreads aren’t fixed. They widen:
- Around major news releases
- During quiet hours, especially the late evening in Toronto
- Around the daily rollover at 5:00 p.m. Eastern
- On Sunday evening when the market reopens
2. Commissions
Many brokers offer two kinds of account:
| Account type | How you pay |
|---|---|
| Standard (spread-only) | No commission, but wider spreads with the broker’s markup built in |
| Raw or ECN | Very tight spreads, plus a fixed commission per lot traded |
For active traders, a raw-spread account with a commission is often cheaper overall. For occasional traders, the difference may be small. The only way to know is to compare the total cost per lot, spread plus commission, on the instruments you actually trade.
3. Swaps (overnight financing)
If you hold a position past the daily rollover, you either pay or receive a swap, sometimes called overnight financing or rollover interest.
Swaps mostly come from interest rates. When you buy a currency pair, you’re effectively holding the first currency and borrowing the second. If the currency you hold has a higher interest rate than the one you’re borrowing, you may earn a small credit; if lower, you pay. So when central banks raise or cut rates, swap rates change too.
There’s one important addition: the broker adds its own markup. That’s why on many pairs you pay a swap on both the long and the short side, and why swaps differ from broker to broker even on the same pair.
A few other things to know:
- Triple swap Wednesday. Most brokers charge three days of swap on positions held over Wednesday’s rollover, to account for the weekend, because of how currency trades settle.
- Swaps can add up. On a position held for weeks, especially with a large size or a big rate gap, swaps can eat into or even exceed your profit.
- Swap-free accounts exist at some brokers, usually with other fees instead.
- Gold and indices have financing charges too, which can be significant over time.
The 5:00 p.m. rollover: when you can’t trade
The forex trading day ends at 5:00 p.m. New York time, which is Toronto time too. That moment is called the rollover, and it’s an awkward few minutes:
- Spreads widen dramatically, sometimes many times their normal size.
- Many brokers pause trading entirely for a few minutes for daily maintenance and settlement. You can’t open or close trades even if you want to.
- Stop losses can trigger on the widened spread, even if the normal price never reached them.
- Swaps are applied to any position held through it.
Many students learn not to trade around the rollover. The practical advice: avoid opening new trades in the half hour around 5:00 p.m., and make sure stops on open positions aren’t sitting so close that a temporary spread spike can trigger them.
What a trade really costs: a worked example
Say you trade 1 standard lot of EUR/USD on a raw-spread account:
| Cost | Amount |
|---|---|
| Spread of 0.2 pips at about $10 per pip | $2 |
| Commission, round trip (example rate) | $7 |
| Swap if held over one night (example) | $8 |
| Total for a one-night trade | about $17 |
Now imagine a scalping strategy that aims for 5 pips, or $50, per trade. Costs of $9 for a same-day trade take almost a fifth of every winning trade, and add to every losing one. Over hundreds of trades, that’s the difference between a profitable strategy and a losing one.
The figures here are illustrations; check your own broker’s numbers. And when you backtest a strategy, make sure realistic costs are included.
How to keep costs under control
- Know your total cost per lot for each instrument you trade: spread plus commission.
- Trade during liquid hours, when spreads are tightest. For most pairs, that’s when London and New York overlap.
- Avoid the rollover and the first minutes after major news.
- Check swaps before holding overnight, especially over a Wednesday.
- Factor costs into your risk-reward. A 1:1 trade with high costs may need a much higher win rate than you think; see risk-reward vs win rate.
- Compare brokers on total cost, not advertised spreads. Our guide to CIRO-regulated vs offshore brokers covers what else to compare.
The bottom line
Every forex trade costs you something: the spread, often a commission, and a swap if you hold overnight. Swaps mainly follow central bank interest rates, plus the broker’s markup, and Wednesday usually counts triple. Around the 5:00 p.m. rollover, spreads blow out and many brokers pause trading completely. Know your real cost per trade, trade when spreads are tight, and build those costs into every plan.
Disclosure: The author, Mike Harding, founded Academy of Financial Markets in Toronto and teaches its mentorship program. Cost figures are illustrative and vary by broker and account type. This article is educational and is not financial advice. Trading carries a high level of risk.