Account types: standard, raw spread, cent
What you learn in 3 minutesA reader asked: "If two accounts show the same USD/ZAR price, why does one look cheaper?" This lesson shows that the same round trip can cost about R19.50 on a standard account and about R19.50 on a raw spread account, because the raw account moves part of the cost into commission instead of removing it. You will see how the spread and the commission are two parts of one total, and why the total is the number that matters.
One round trip at 18.4100: R19.50 on both accounts
| Step | Amount | Note |
|---|---|---|
| Standard account spread | 20 pips | The quoted buy price is 18.4110 and the sell price is 18.4090, so the spread is 0.0020, which is 20 pips. |
| Standard account lot size | 0.10 lots | A standard lot is 100,000 units, so 0.10 lots is 10,000 units of USD/ZAR. |
| Standard account cost of the spread | R20.00 | 20 pips × 0.10 lots × R10 per pip = R20.00. The R10 per pip comes from 10,000 units × 0.0001, which is 1.00 USD, converted at about 18.4100 to about R18.41, rounded here to R10 for a simple example. |
| Raw spread account spread | 2 pips | The quoted buy price is 18.4101 and the sell price is 18.4099, so the spread is 0.0002, which is 2 pips. |
| Raw spread account cost of the spread | R2.00 | 2 pips × 0.10 lots × R10 per pip = R2.00. |
| Raw spread account commission | R17.50 | A commission of R175 per standard lot round trip × 0.10 lots = R17.50. This figure varies between brokers. |
| Raw spread account total | R19.50 | R2.00 spread + R17.50 commission = R19.50. |
| Standard account total | R20.00 | R20.00 spread + R0.00 commission = R20.00. |
Brokers may round pip values, charge commission per side or per round trip, add swap or financing charges for positions held overnight, and quote different spreads at different times. The R10 per pip used here is a rounded figure for a 0.10 lot USD/ZAR position at about 18.4100, and the exact rand value changes as the exchange rate moves.
The mistake people make here
The common mistake is to compare only the spread and pick the account with the smallest number. A raw spread account can look cheaper because the spread is 2 pips instead of 20, but the commission is charged on top, so the total is what leaves the account. Before choosing an account type, add the spread cost and the commission for the same trade size, and check whether the commission is per side or per round trip. If the total is similar, the account type is mostly about how the cost is presented, not about a free discount.Check yourself
On a raw spread account, the spread is 2 pips and the commission is R175 per standard lot round trip. For 0.10 lots, what is the total cost in rand?
Spread cost: 2 pips × 0.10 lots × R10 per pip = R2.00. Commission: R175 × 0.10 = R17.50. Total: R2.00 + R17.50 = R19.50.
On a standard account, the spread is 20 pips and there is no commission. For 0.10 lots, what is the total cost in rand, and how does it compare with the raw spread total of R19.50?
Spread cost: 20 pips × 0.10 lots × R10 per pip = R20.00. Commission: R0.00. Total: R20.00. The standard account total is R20.00, which is R0.50 more than the raw spread total of R19.50 in this example.