Every position opens with a small built-in disadvantage: the spread. When you buy at the ask and the market only needs to reach the bid to close flat, that gap between the two prices is money paid to the broker or liquidity provider for facilitating the trade. Understanding how this cost is structured is essential before choosing a broker or a trading style.
Fixed vs Variable Spreads
Fixed spreads stay constant regardless of market conditions, offering predictability but often sitting wider on average. Variable (floating) spreads move with market liquidity — they tend to be tight during active hours and widen sharply around news releases or in thin, illiquid sessions such as the early Asian session.
How Commission Models Work
Some account types advertise near-zero spreads but charge a fixed commission per lot traded instead. This is common on so-called ECN or raw-spread accounts, where the visible spread reflects real interbank liquidity and the commission is the broker's transparent fee. Other account types fold the entire cost into a wider spread with no separate commission line.
Suppose a broker quotes EUR/USD at 1.10000/1.10012 — an illustrative 1.2 pip spread. On a standard lot this could represent roughly 12 illustrative units of the quote currency in cost, paid the instant the trade is opened. These figures are illustrative only and vary constantly by broker and market conditions.
Comparing Cost Structures
| Account type | Spread | Commission | Typical user |
|---|---|---|---|
| Standard | Wider, all-inclusive | None | Casual or beginner traders |
| Raw / ECN | Very tight, near-interbank | Fixed per lot | Active or high-frequency traders |
| Fixed-spread | Constant regardless of session | Usually none | Traders wanting cost predictability |
Why Spread Matters More for Short-Term Strategies
A swing trader targeting 100+ pips barely notices a 1-2 pip spread — it's a small fraction of the expected move. A scalper targeting 5-10 pips per trade is fighting the spread on almost every position, which is why scalping strategies typically require the tightest possible spread and lowest commission structure to remain viable at all.
Spread cost as a percentage of target
A useful mental model is to express the spread as a percentage of your typical profit target. If your average winning trade nets 50 pips and the spread is 1.5 pips, the spread consumes about 3% of the gain. If your target is 8 pips, that same spread consumes nearly 19% — a dramatically different cost burden for an otherwise identical strategy logic.
News Events and Spread Widening
Around major economic releases, liquidity providers often pull back or widen their quotes sharply to protect against sudden volatility. A spread that is normally tight can widen many times over for a few seconds or minutes. Traders holding positions or attempting to enter right at release time should expect this and size accordingly.
Focusing solely on the advertised spread while ignoring commissions, swap fees, and slippage gives an incomplete cost picture. Always evaluate total round-trip cost, not a single number in isolation.
Practical Takeaways
- ▸Match your strategy's target size to the spread cost — very short targets need very tight spreads to remain viable.
- ▸Compare total cost (spread plus commission) across account types rather than judging spread in isolation.
- ▸Expect spreads to widen around news and in low-liquidity sessions, and plan entries accordingly.
- ▸Track your actual realized cost per trade over time rather than relying only on advertised figures.