Open any trading platform and every instrument shows two prices. The first, the bid, is what you can sell at. The second, the ask, is what you can buy at. The gap between them has a name every trader knows and almost nobody puts a number on: the spread.
Two prices, one gap
On EUR/USD, the screen might show 1.0850 to sell and 1.0852 to buy. The gap is 0.0002, or 2 pips.
Buy at 1.0852 and sell a second later: you sell at 1.0850. The trade closes at a loss even though the market has not moved at all. That is why every position opens slightly in the red. The spread is the toll for getting in.
Turning pips into money
A pip means nothing until you convert it. Its value depends on position size: on one standard lot of EUR/USD, which is 100,000 euros of base currency, one pip is worth 10 dollars.
The formula fits on one line: spread in pips × pip value × number of lots.
Twenty dollars on a single trade is painless. That is exactly the problem.
Why you never see it
A commission, when there is one, gets its own line. The spread is already inside the execution price. Your statement shows an entry price and an exit price. It never says "spread". To see it, you have to go looking.
A spread that moves
The number in the ads ("from 0.1 pips") describes the best conditions of the day. The real spread widens:
- at the open and close of the major sessions;
- around economic releases (US jobs data, central bank decisions);
- overnight, when liquidity thins out;
- on exotic pairs and smaller indices.
You also need to compare like with like. A "standard" account often has a wider spread and no commission. A "raw" or "ECN" account has a tight spread and charges a separate commission. Only the total cost per lot settles the question.
Over a year
Take an active trader: 200 one-lot trades a year on EUR/USD, with an average spread of 2 pips.
That figure depends on neither your wins nor your losses. It depends only on how many times you place an order.
What you can do
- Measure your broker's average spread at the hours you actually trade, not the one in the brochure.
- Compare the total cost per lot, spread plus commission, across account types.
- Avoid entering just before a major release unless your strategy requires it.
- Get part of it back. Brokers pass on a share of what they earn on your orders to the partners who introduce clients to them. RendR is one of those partners, and pays you a share of that rebate, lot by lot, whether the trade wins or loses. The details are on the home page.
The spread never disappears. The only question is who keeps what.
Margin trading carries a high risk of losing your capital, and cashback does not reduce that risk. RendR is not an investment adviser, manages no capital on behalf of its users, and never holds an account’s trading password. Cashback depends on the agreements reached with each partner broker.
Read the full risk warning