The three costs: spread, commission, swap
What you learn in 3 minutesThis lesson answers a question many new readers ask: when I open a trade, what exactly do I pay, and when do I pay it? By the end you will know the three costs — spread, commission and swap — and you will be able to put a rand figure on each one before you click buy or sell. The numbers below use a USD/ZAR price of about 18.4100 and a rand amount for every cost, so nothing is left vague.
1 lot USD/ZAR: R22 spread plus R7 commission equals R29
| Step | Amount | Note |
|---|---|---|
| Spread on entry | R22 | 1 lot is 100,000 units. A spread of 1.2 pips on USD/ZAR at 18.4100 is 0.00012 × 100,000 = R12, but the broker may quote a wider spread on this pair, so we use R22 as a round figure for a typical retail spread. |
| Commission on entry | R7 | Some account types charge a commission per lot per side. R7 is a common example; other brokers charge no commission but a wider spread. |
| Commission on exit | R7 | The same commission is charged again when the position is closed, so the round turn is R14. |
| Total cost to open and close | R29 | R22 spread + R7 + R7 commission = R29. This is paid whether the trade wins or loses. |
The broker may round the spread, charge a different commission on other account types, or add a swap if you hold the position overnight. Swap varies with the pair and the broker, so check the contract specifications before you trade.
The mistake people make here
The mistake is to look only at the spread and forget commission and swap. A tight spread can look cheap, but if commission is R14 round turn and you hold for a week, the swap can add several rand per night. Instead, add all three costs together before you enter. Write them down in rand, compare that total with the size of the move you expect, and only then decide if the trade is worth taking.Check yourself
If the spread on 1 lot USD/ZAR is R22 and commission is R7 per side, what is the total cost to open and close one trade?
R22 + R7 + R7 = R36.
You hold that same 1 lot position for three nights and the swap is R4 per night. What is the total cost now?
R36 + (3 × R4) = R36 + R12 = R48.