Spread, Commission, or Swap: The Real Costs of Forex Trading

Imagine you want to buy something, but the seller charges you a little extra just for the privilege.

In forex trading, that extra is called the spread — the small difference between the buying price and the selling price.

When you open a trade, you pay the spread right away, like a ticket price.

Some accounts also charge a fixed fee called a commission, kind of like paying an entrance fee for every ticket.

If you keep your trade open overnight, you pay another small fee called swap, which is like a tiny nightly rent for borrowing money.

Swap changes depending on the interest rates of the two currencies you are trading.

On Wednesdays, the swap fee is multiplied by three to cover the weekend when markets are closed.

Occasionally, a trade fills at a slightly worse price than expected — that's slippage, a hidden extra cost.

To know how much a trade really costs, you have to add up the spread, the commission, and the swap, because the cheapest-looking account isn't always the cheapest overall.