Spread vs Commission: The True Cost of Trading
Understanding trading costs is essential. Learn how spreads and commissions work and which fee structure is cheaper. Work out the true all-in cost per trade.
Spread
The spread is the difference between bid and ask price. If EUR/USD bids at 1.1050 and asks at 1.1052, the spread is 2 pips ($20 per standard lot). This is the primary cost for most CFD traders. Spread varies by liquidity — tighter during London/NY sessions, wider during Asian session.
Commission
Some accounts charge a fixed commission per trade instead of (or in addition to) spread. Typical: $3-7 per lot per side ($6-14 round trip). Raw spread accounts (ECN) offer 0-pip spreads but charge commission.
Which Is Cheaper?
Compare round-trip costs: Standard account with 1.5 pip spread = $15 per lot. ECN account with 0.2 pip spread + $7 commission = $2 + $7 = $9. For high-volume traders, ECN is cheaper. For occasional traders, standard is simpler.
Disclaimer: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 70-80% of retail investor accounts lose money when trading CFDs. Backtesting does not guarantee future results. Always consider whether you can afford the potential loss of your capital.