The Two Cost Models in Forex
Every forex broker charges you in one of two ways — or a combination of both:
**1. Spread-only (no commission):** The broker makes money from the difference between the buy and sell price. EUR/USD might be 0.8 pips wide instead of the raw 0.0–0.1 pip interbank rate.
**2. Raw spread + commission:** You get near-interbank spreads (0.0–0.1 pips on EUR/USD) but pay a fixed commission per lot traded — typically $3.00–$7.00 per lot round-turn.
The Real Math — 100 Trades Example
Let's say you trade 1 standard lot (100,000 units) of EUR/USD, 100 times.
Spread-only broker (eToro — 1.0 pip spread):
ECN broker (Pepperstone Razor — 0.1 pip + $7 commission):
**Winner: ECN/commission model** — $200 cheaper over 100 trades.
When Spread-Only Wins
The math flips for very small traders or infrequent traders:
If you trade micro-lots (0.01 lot) or less than 10 trades/month, the fixed commission structure becomes disproportionately expensive. A $7 commission on a 0.01 lot trade represents a massive percentage cost.
Rule of thumb:
Hidden Costs to Watch
Beyond spread and commission, always check:
This article is for informational purposes only. Past performance is not indicative of future results.