Spread, commission, swap: the real cost of a trade
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The short answer
Three costs add up. The spread, paid on every position, means you are at a loss the second you enter. The commission, charged per lot and per side on tight-spread accounts, is therefore paid twice on a round trip. The swap only concerns positions held overnight, but it is charged every night and counts triple once a week. Comparing two brokers therefore means adding spread and commission together, never looking at one of them alone.
The spread: you always start at a loss
There is not one price but two, the bid where you sell and the ask where you buy. The gap between them is the spread, and it is your first cost.
The consequence is mechanical: the second you open a position, it shows a loss equal to the spread. The market has to travel that distance before you are even.
The spread is not constant. It tightens in the busiest hours and widens when nobody is there or when a release lands, which our page about market sessions covers.
Commission: the comparison trap
Many brokers offer two tiers on the same instruments: one with a wide spread and no commission, one with a tight spread and a commission. Those are often the duplicate symbols described on our page about suffixes and duplicates.
Commission is charged per lot and per side. A rate advertised for an entry is therefore paid twice over a full round trip, which advertising regularly forgets to mention.
The only honest comparison adds the two together. A tight spread with a commission can work out more expensive than a wide spread without one, or the other way round: it depends on the instrument and the moment. The total is the only figure that counts.
Swap: the cost of holding a position
A position kept past the daily close, around 23:00 Paris time, gives rise to a charge or a credit called swap. It depends on the instrument, on the direction of your position and on interest rates.
Two quirks make it heavier than it looks. It is charged every night, including when nothing happens. And it counts triple once a week, generally on the Wednesday to Thursday night, to cover the coming weekend.
On cryptocurrency CFDs that cost is often markedly heavier than in forex. A position held for three weeks can lose a significant share of its target there without price having fallen.
Swap can also be positive, in which case it is credited to you. It is not something to build a strategy on: the broker can change it whenever it wants.
Relating the cost to your target
A cost is not judged in absolute terms but against what you are going after.
A round trip of 1.5 points on a 10 point target is 15 % of the target consumed before you have started. The same cost on a 200 point target is nothing.
That is the deep reason why a short horizon demands a cheap broker, and why a fast trader can be right more than half the time and finish negative. The subject is covered on our page about choosing your timeframe.
The costs that are not in the trade
Three other lines are worth checking in your account terms, even though they do not show when you open a position.
Currency conversion, when the instrument does not settle in your account currency: every result is converted, at a rate that is not always the best available.
Inactivity fees, charged after a few months without a trade, and withdrawal fees, which vary a great deal from broker to broker.
What AlphaGPT does
The spread is counted in the risk distance used to compute your size. In other words, the size offered accounts for the fact that you enter already at a loss, rather than reasoning on a theoretical distance. The calculation is detailed on our page about risk per trade.
On the other hand, the tool computes neither commission nor swap, and will not tell you whether your broker is expensive. That information is in the contract specification and in your account terms, and it remains yours to check.
Trading carries a risk of capital loss.