What happens when you press Buy
What you learn in 3 minutesPressing Buy does not put money in your account. It sends an instruction to a broker. That instruction is filled at a price, turns into an open position, and only becomes a profit or a loss when you close it. Every cost you pay attaches to one of those four steps, so it helps to know which step costs what.
One order, four steps, and what each step costs on 0.10 lots
| Step | Amount | Note |
|---|---|---|
| Step 1: Order sent | ₦0 | Sending an order costs nothing at most brokers. Some charge a small platform or data fee, and it varies between brokers. |
| Step 2: Filled at 1.0850 | Spread cost: 1 pip x 0.10 lots x 10 units per pip x ₦1,600 per unit | One pip on one standard lot is 10 units of the quote currency, so 0.10 lots is 1 unit per pip. At an exchange rate of ₦1,600 to 1 unit, 1 pip costs ₦1,600. |
| Step 2 cost in naira | ₦1,600 | This is the spread, the gap between the buy price and the sell price. It is paid the moment the position opens. |
| Step 3: Position open | ₦0 to hold overnight, or a swap fee if held past the daily cut-off | The swap is a small credit or charge. It varies between brokers and by instrument, so check the contract details. |
| Step 4: Closed at 1.0860 | 10 pips gained x 1 unit per pip x ₦1,600 = ₦16,000 gross | 10 pips is the distance from 1.0850 to 1.0860. The gross figure is before the spread already paid at Step 2. |
| Result after the spread | ₦16,000 - ₦1,600 = ₦14,400 | The spread is subtracted because it was paid when the position opened. |
The broker may round the fill price, quote a slightly wider spread at busy times, or add a commission on some account types. The swap on Step 3 can turn a small gain into a smaller one if the position is held for several days.
The mistake people make here
Many beginners treat the profit shown on screen as the money they will receive. The screen often shows the gross figure, before the spread and any swap are taken out. The fix is to subtract the spread cost first, then check whether a swap applies, and only then decide whether the trade is worth opening. If the expected move is smaller than the spread, the trade starts in the red.Check yourself
You open 0.10 lots of EUR/USD at 1.0850 and close at 1.0870. The spread is 1 pip and the exchange rate is ₦1,600 per unit. What is the result after the spread?
The move is 20 pips. At 0.10 lots, 1 pip is 1 unit, so 20 pips is 20 units, which is ₦32,000 gross. The spread costs 1 pip, or ₦1,600. The result after the spread is ₦32,000 - ₦1,600 = ₦30,400.
You open 0.10 lots of EUR/USD at 1.0850 and close at 1.0845. The spread is 1 pip and the exchange rate is ₦1,600 per unit. What is the result after the spread?
The move is 5 pips against you. At 0.10 lots, 1 pip is 1 unit, so the loss is 5 units, which is ₦8,000. Add the spread of ₦1,600. The total cost is ₦8,000 + ₦1,600 = ₦9,600.