Reading a trading cost

The spread is the gap between the bid and the ask. You buy at the ask and you sell at the bid, so you pay it once on entry and it is already reflected in the negative floating profit of a brand new position. Quoted in pips or points it is abstract; quoted in money it is a decision.

Multiply the spread by your value per point. Gold at a 20-cent spread with 0.5 lots is 50 ounces × 0.20 = 10 dollars to open. If your average winning trade is 15 dollars, you have a problem that has nothing to do with your entries.

Spreads are not constant. They widen at the daily rollover, around scheduled news, and whenever liquidity thins. A strategy tested against an average spread and traded during a spike is not the same strategy.

Raw-spread accounts trade a tighter spread for an explicit commission, usually quoted per lot per side. Three dollars per lot per side means a one-lot round turn costs six dollars, and a 0.1-lot round turn costs sixty cents.

Which is cheaper depends entirely on your size and frequency. Compare like for like by converting both to a single round-turn cost: on a standard account it is spread × value per point × 1. On a raw account it is (tighter spread × value per point) + commission × 2 × lots.

Commission is charged on open and again on close, and it is debited from balance immediately, so a position can show a small floating loss beyond the spread. That is the entry commission, not a pricing error.

Swap is the financing adjustment applied when a position is held through the daily rollover, usually 00:00 server time. It can be negative or positive depending on the instrument and your direction, and on Wednesday it is normally charged at triple to cover the weekend value date.

For a position held minutes, swap is irrelevant. For one held weeks, it can be the largest single cost in the trade. Check the instrument specification before you build anything that holds overnight, and check both directions — they are rarely symmetrical.

Swap-free accounts exist for religious reasons and usually replace swap with a flat administration fee after a grace period. That fee is a cost too; read where it starts.

Do this arithmetic once per instrument and keep it written down. For 0.5 lots of gold on a standard account: value per point is 50 dollars per one-dollar move, or 50 cents per cent. A 20-cent spread costs 10 dollars. Commission is zero. Held intraday, swap is zero. Total round-trip cost: 10 dollars.

Now set that against the trade. If the plan risks 30 cents (15 dollars) to make 60 cents (30 dollars), the cost is a third of the risk and two thirds of the profit is gone before you are right. That is a strategy with a cost problem, and no amount of entry skill fixes it.

The trading calculator does this arithmetic for you for any symbol, size and leverage. Use it before the trade, not after.