The three costs: spread, commission, swap
What you learn in 3 minutesThis lesson shows what a trade costs before it starts. You pay the spread when you open, commission on some account types, and swap for every night you hold. All three are known in advance, so you can work out the cost in naira before you click buy or sell.
One standard lot: what 1.2 pips and $7 commission cost in naira
| Step | Amount | Note |
|---|---|---|
| Spread cost on entry | ₦19,530 | 1.2 pips on one standard lot. One pip is 10 units of the quote currency (100,000 x 0.0001), so 1.2 pips is 12 units of the quote currency. At 1.0850, that is 12 x 1.0850 = 13.02 units of the quote currency, converted to naira at the rate your broker uses. Here we use ₦1,500 per unit of the quote currency, giving ₦19,530. |
| Commission on entry and exit | ₦10,500 | A round turn of $7. Converted at ₦1,500 per dollar, that is ₦10,500. This is charged once for the full trade, not once per side. |
| Total cost to open and close | ₦30,030 | ₦19,530 spread plus ₦10,500 commission. This is paid whether the trade wins or loses. |
| Swap per night held | Varies | Swap is charged for every night the position stays open. It depends on the broker, the instrument and the direction of the trade. It is not included above because it changes daily. |
Your broker may round the pip value, charge commission in a different currency, or add a markup on the spread. Swap rates also change. Check the contract specifications on your account before you trade.
The mistake people make here
The common mistake is to look only at the spread and forget commission and swap. A tight spread can still be expensive if commission is high or if you hold the position for many nights. Before you trade, add up all three costs in naira. If you do not know the swap rate, ask your broker or check the platform. Do not assume the spread is the only cost.Check yourself
If the spread is 1.2 pips on one standard lot of EUR/USD and the rate is 1.0850, what is the spread cost in units of the quote currency?
1.2 pips x 10 units per pip = 12 units of the quote currency. At 1.0850, that is 12 x 1.0850 = 13.02 units of the quote currency.
If commission is $7 round turn and the exchange rate is ₦1,500 per dollar, what is the commission in naira?
$7 x ₦1,500 = ₦10,500.
Using the same numbers, what is the total cost to open and close the trade in naira, before swap?
Spread cost: 12 x 1.0850 = 13.02 units of the quote currency. At ₦1,500 per unit, that is ₦19,530. Commission: ₦10,500. Total: ₦19,530 + ₦10,500 = ₦30,030.