What Is Spread and How It Affects Your Trading Costs
Every trade opens as a loss. You buy at the ask, the market values your position at the bid, and the difference between them is already against you before the price has moved.
That difference is the spread. It is the most consistently underestimated cost in retail trading, largely because nobody ever sends you an invoice for it.
The Gap Between Buying and Selling
Two prices are quoted on every instrument. The bid is what you can sell at. The ask is what you can buy at. The gap is the spread, normally expressed in pips.
A 0.8 pip spread on EURUSD means a one lot position opens around $8 down before anything happens.
That is not a penalty and it is not the platform skimming. It is what the market charges for immediacy. You wanted to trade now instead of waiting for somebody to come to your price.
What is Spread and How it Affects Your Trading Costs Over Volume
Per trade, spread looks trivial. Across a strategy it decides whether you are profitable.
The arithmetic is simple and unpleasant. One pip of spread on one standard lot is roughly $10 per round trip. A system placing 300 trades in a month pays $3,000 in spread alone. On a $100,000 account chasing a 10% target, that is close to a third of the target gone before a single losing trade is counted.
Turnover is the multiplier. A swing trader placing eight trades a month hardly notices. A scalper placing eight a day is running a business where spread is the largest expense line.
This is why systems that backtest beautifully on close prices collapse in practice. The backtest never paid to get in.
When Spread Widens
Spread is not a fixed number on most accounts.
It widens at the daily rollover when liquidity providers step back. It widens around high impact releases, sometimes severely. It widens in thin hours, on exotic pairs, and at the Sunday open.
News trading is permitted at TTT Markets and plenty of traders use that. Just understand that the spread you tested against at midday in London is not the spread waiting for you thirty seconds after a rate decision.
Log the real spread on your instruments during the sessions you actually trade. Do not plan around a number from a marketing table.
Raw and Standard Accounts Charge the Same Thing Differently
A raw account shows a very tight spread and adds a commission per lot. A standard account shows a wider spread with no commission.
Compare the headline spreads and you will reach the wrong conclusion every time. Add the commission back and the two usually land within a fraction of a pip of each other. Nobody is giving anything away. The same cost is sitting in a different column.
The only figure worth comparing is total cost per round trip, in currency, on the instrument you trade.
Conclusion – What Is Spread and How It Affects Your Trading Costs
What is spread and how it affects your trading costs is a question about volume more than size. It is a small number multiplied by every trade you will ever place, and it comes out of the same equity your profit target and your drawdown limit are measured against. Price it in while you are building the strategy, not after it stops working.
FAQ – What Is Spread and How It Affects Your Trading Costs
1. Does spread count toward my drawdown?
Yes. It hits your floating equity the moment the position opens, so it counts exactly like any other loss.
2. Why is my spread wider than the advertised figure?
Advertised spreads are usually averages or best case during peak liquidity. Your actual fill depends on the instrument, the session, and what the market is doing at that second.
3. Is a raw account cheaper than a standard one?
Rarely, once commission is added back. Compare total cost per round trip instead of the spread in isolation.
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Additional resources:
Forex Spreads: Function, Calculation and Impact on Trading | ThinkMarkets
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