Trading Fundamentals
Understand spreads, commissions, swaps, and slippage, key trading costs that can affect overall results.
Trading costs can affect overall results, especially for active trading strategies. Understanding spreads, commissions, swaps, slippage, and other charges can help participants better evaluate the total cost of opening, holding, and closing positions.
The spread is the difference between the bid price and the ask price of an instrument. It is one of the main trading costs and is reflected when opening or closing a position. Spreads may be tighter on highly liquid instruments, such as major currency pairs, and wider on exotic pairs or during low-liquidity periods.
Variable spreads change with market conditions and may widen during volatile periods or low-liquidity sessions. Fixed spreads are designed to remain more consistent, though they may be wider than variable spreads under normal market conditions. Each pricing model has different considerations depending on the instrument, account type, and market environment.
Some account types apply a commission in addition to the spread. Commission-based pricing may offer tighter spreads, but the total trading cost includes both the spread and any applicable commission. Participants should review both components when comparing account pricing.
Positions held open past the daily rollover time may be subject to swap or overnight financing. A swap may be a credit or debit depending on the instrument, position direction, applicable rates, and how long the position remains open.
Slippage occurs when an order is executed at a price different from the price requested or displayed when the order was placed. It can happen during fast-moving markets, around major news releases, or when liquidity is limited. Slippage may be positive or negative and can affect the final execution price.
Depending on the instrument, account type, funding method, and platform, other costs may include inactivity fees, deposit or withdrawal charges, currency conversion costs, and data subscription fees. Reviewing the full cost structure of an account can help participants better understand the total cost of trading.
Select your evaluation account to apply these concepts in a simulated evaluation program built around discipline, consistency, and risk management.