Most traders underestimate how much spreads cost them annually. A 0.5-pip difference in EUR/USD spread seems trivial on a single trade, but over hundreds or thousands of trades per year, it compounds into a significant drag on your profitability. This guide provides the formulas and tables you need to calculate your actual spread costs.
The Spread Cost Formula
Your annual spread cost depends on four variables:
Annual Spread Cost = Spread (in pips) x Pip Value x Lots per Trade x Trades per Day x 252 Trading Days
For EUR/USD, 1 pip = $10 per standard lot. So:
- 1.0-pip spread x $10 x 1 lot x 1 trade/day x 252 days = $2,520/year
- 0.1-pip spread x $10 x 1 lot x 1 trade/day x 252 days = $252/year
The difference between a 1.0-pip and 0.1-pip spread on just 1 lot per day is $2,268 per year. Scale that to 5 lots per day and the difference becomes $11,340.
Total Cost: Spread + Commission
Raw spread accounts charge a separate commission, so you need to add both components:
Total Cost = (Spread Cost) + (Commission x Lots per Trade x Trades per Day x 252)
| Account Type | Spread (EUR/USD) | Commission (RT) | Total per Lot | 1 lot/day Annual | 5 lots/day Annual |
|---|---|---|---|---|---|
| Exness Standard | 1.0 pips | $0 | $10.00 | $2,520 | $12,600 |
| Exness Raw | 0.0 pips | $7.00 | $7.00 | $1,764 | $8,820 |
| Exness Zero | 0.0 pips | $7.00 | $7.00 | $1,764 | $8,820 |
| XM Standard | 1.6 pips | $0 | $16.00 | $4,032 | $20,160 |
| XM Zero | 0.0 pips | $7.00 | $7.00 | $1,764 | $8,820 |
| IC Markets Raw | 0.1 pips | $7.00 | $8.00 | $2,016 | $10,080 |
A trader doing 5 lots per day saves $11,340 annually by using Exness Raw instead of XM Standard. This is not an optimization — it is the difference between profitability and loss for many traders.
Spread Cost by Instrument
Different instruments have different pip values. Here is the cost per standard lot at various spread levels:
| Instrument | Pip Value/Lot | 0.5-pip Spread | 1.0-pip Spread | 2.0-pip Spread |
|---|---|---|---|---|
| EUR/USD | $10 | $5.00 | $10.00 | $20.00 |
| GBP/USD | $10 | $5.00 | $10.00 | $20.00 |
| USD/JPY | ~$6.60 | $3.30 | $6.60 | $13.20 |
| Gold (per 10 cents) | $10 | $5.00 | $10.00 | $20.00 |
Break-Even Analysis
Your spread cost determines how far the market must move in your favor before you break even. On a 1.0-pip spread, the market must move 1.0 pips in your direction just to cover the spread. On a 0.1-pip spread, you break even after just 0.1 pips.
For scalpers targeting 5-10 pip profits, this is critical. With a 1.0-pip spread, 10-20% of your target profit is consumed by the spread. With a 0.1-pip spread, only 1-2% is consumed. This is why scalpers must use raw spread accounts.
When Spread Savings Do Not Matter
If you trade 1-2 times per month and hold positions for weeks, the spread cost is negligible compared to your profit target. A swing trader targeting 200 pips does not care about a 0.5-pip spread difference. In this case, other factors like swap costs, regulation, and platform features matter more than raw spread pricing.
Spread optimization matters most for: scalpers, day traders, high-frequency manual traders, and anyone doing more than 1 lot per day on average.
For the lowest-cost accounts, see lowest spread forex brokers. For gold-specific costs, see gold spread rankings. For understanding account types, see raw spread vs standard accounts.
Trade with the Lowest Spreads
Exness offers the tightest spreads among regulated brokers. Zero account from 0.0 pips. Instant withdrawals.
Open Exness AccountFrequently Asked Questions
How do I calculate my annual spread cost?
Annual Spread Cost = Spread (pips) x Pip Value ($10 for EUR/USD) x Lots per Trade x Trades per Day x 252 trading days. Add commission for raw accounts. Example: 0.1-pip spread, 2 lots/day = 0.1 x $10 x 2 x 252 = $504/year plus commission.
How much can I save by switching to a low-spread broker?
A trader doing 5 lots/day of EUR/USD saves $11,340 per year switching from a 1.6-pip standard account to a 0.0-pip raw account ($7 commission). Even 1 lot/day saves $2,268 annually.
Are raw spread accounts always cheaper than standard accounts?
For active traders (1+ lots/day), yes. The raw spread plus commission is almost always cheaper than the wider standard spread. For very low-volume traders (a few trades per month), the simplicity of standard accounts may be preferred despite the higher per-trade cost.
Trading forex and CFDs carries a high level of risk. 74-89% of retail investor accounts lose money when trading CFDs. You should consider whether you can afford the high risk of losing your money. This article contains affiliate links.