Understanding Trading Costs: Spread, Commission, Swap & Other Fees

Every broker earns money from your trading activity in a few specific ways. You've already met two of them — the spread and the commission — but there are a couple more worth knowing before you start trading for real.

The spread is the small gap between the buying price and the selling price of whatever you're trading. It's built into the price itself, so you pay it the moment you open a trade.

A commission is a separate, fixed fee some brokers charge per trade, on top of the spread. Not every broker charges one — it depends on the account type you choose.

A swap (also called an overnight or rollover fee) is a charge, or sometimes a credit, applied when you keep a trade open past a certain cut-off time each day, usually around 5pm New York time. It exists because holding a currency position overnight is effectively borrowing one currency to hold another, and that borrowing has a cost — or occasionally a benefit, depending on the direction of your trade and current interest rates. If you open and close a trade within the same day, you won't pay this at all.

An inactivity fee is charged by some brokers if your account sits completely untouched for a long stretch, often three to six months. It's rarely large, but it catches people off guard when they open an account, get busy, and come back later to find a small deduction.

Finally, some deposit and withdrawal methods carry their own fee, separate from anything the broker charges — this depends on your bank or payment provider, not the broker.

None of these costs should scare you away from trading — they're just part of doing business with any financial company. The point is simply to check a broker's full fee schedule before you commit, rather than judging them only by the headline spread in their ads.