The three costs: spread, commission, swap

Open any EUR/USD chart and you see one line of prices. That line is the last traded price. It is not the price you get. Behind it sit two prices: the bid and the ask. The bid is what a buyer of euros will pay you if you sell. The ask is what a seller of euros will charge you if you buy. The gap between them is the spread.

On a chart set to one-minute candles, the spread is often smaller than the candle body. You will not see it unless you zoom in or add the bid and ask lines. On a daily chart, one candle can cover 60 pips, so a 1.2 pip spread is invisible. That is why a chart alone will not show your cost. The chart shows price movement. The spread sits inside every entry and every exit, whether you see it or not.

The spread is quoted in pips. One pip on EUR/USD is the fourth decimal place, so a move from 1.0850 to 1.0851 is one pip. If the bid is 1.08494 and the ask is 1.08506, the spread is 1.2 pips. You buy at the ask and sell at the bid. The moment you open a trade, the price must move in your favour by the spread before you are level. That is the first cost, and it is paid on entry.

Commission does not appear on the chart. It appears on your account statement as a separate line, usually labelled commission or fee. Some account types charge no commission and a wider spread instead. Others charge a narrow spread plus a commission. The two models can end up close to each other in total cost, but they are not the same. You will see the commission as a negative amount in the currency of your account, which for a Philippine reader is usually PHP.

Swap is the interest you pay or receive for holding a position overnight. It appears on your statement once for each night the position stays open. The broker sets it from the difference between the two interest rates in the currency pair, plus a small charge. Swap can be positive or negative. On EUR/USD, the rate difference changes over time, so the swap for tonight is not the swap for next week. Your platform shows the current swap per lot before you enter.

Both commission and swap are known before you trade. The commission is fixed by the account type and shown in the contract specifications. The swap is shown in the platform's swap table, usually per standard lot per night. Neither depends on whether the trade wins or loses. They are charged either way. A trade that ends flat can still lose money once these two are added to the spread.

You can work out the total cost on one standard lot of EUR/USD using the numbers from the platform. Suppose the spread is 1.2 pips and one pip is worth ₱10. The spread cost is 1.2 times ₱10, which is ₱12. If the round-turn commission is ₱7, the entry and exit cost is ₱12 plus ₱7, which is ₱19. If you hold for three nights and the swap is ₱5 per night, the swap cost is 3 times ₱5, which is ₱15. The total is ₱19 plus ₱15, which is ₱34.

That total is the amount the price must move in your favour before you make any profit. On one standard lot, a move of 3.4 pips covers ₱34. If you hold for ten nights at ₱5 per night, the swap alone is ₱50, and you need a 5 pip move just for that. The longer you hold, the more the swap matters. The spread and commission are paid once. The swap is paid every night.

The broker may round the spread, charge commission per side rather than round turn, and add swap for each night the position is open. The exact figures vary between brokers and between account types, so check the contract specifications for the account you use. The method stays the same: find the spread in pips, multiply by the pip value, add the commission, then add the swap for each night you plan to hold. That gives you the full cost before you enter.