All Types Of Forex Fees And Hidden Costs Explained

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The main types of Forex fees and costs include:

Spreads - gap between bid and ask.
Commissions - paid on a per lot basis.
Swap rates - charged for positions held overnight.
Gapping - sudden and irregular jump in price.
Financing costs - for availing leverage.
Withdrawal fees - for transferring money to your account.

Forex trading opens the door to trading success, but to thrive, it's crucial for traders to understand the complex fee structure and costs that come with it. In this article, we will break down the key Forex fees you might face, highlighting the hidden costs to help you be prepared and adjust your trading approach accordingly.

Forex trading costs explained

Forex trading costs are the money you spend to use a broker to engage in trading and manage your investments. These fees include transaction fees, withdrawal fees, inactivity fees, research fees, and annual fees. In order to effectively manage your finances and trading endeavors, it is important to understand the full fee structure, as well as the various policies that accompany it.

Note that brokerage fee structures and policies can vary significantly from one broker to another. These fees can be broadly divided into two main types:

Trading fees. These only come into effect when you make a trade. They cover a range of fees, including conversion fees, margin rates, financing rates, spreads, and commissions.
Non-trading fees. Not directly related to your trading activities and may include inactivity fees, withdrawal fees, deposit fees and more.

Spreads

Consider the spread as the fee your broker levies for facilitating your trades. As you might already know, brokers provide two prices for each currency pair: the buying price (bid price) and the selling price (ask price). The spread is essentially the gap between these two prices and represents the cost imposed by the broker for their services. This is how brokers generate their revenue and sustain their operations.

For instance, let's say you want to initiate a long (buy) trade on the EUR/USD currency pair, and your price chart displays a rate of 1.3000. However, your broker quotes two prices: 1.3002 for buying and 1.3000 for selling. When you hit the buy button, your position will be entered at 1.3002, resulting in a 2-pip charge for the spread (the difference between 1.3002 and 1.3000).

Even when you decide to close a short (sell) trade, you'll still encounter the spread. Suppose the price chart shows 1.3000 for selling, then, even if the last traded price is 1.3002, the sell order will only be executed if you’re willing to accept the rate of 1.3000.

In essence, the spread signifies the disparity between the buying and selling prices of any asset or currency pair. This spread is a trading cost for you and a source of income for the broker. The bid price reflects the highest amount the broker will pay to purchase the instrument from you, while the ask price represents the lowest sum the broker will charge to sell the instrument to you.

To turn a profit or avoid losses in a trade, the price must move sufficiently to offset the spread cost.

Variable rate spreads

It's worth noting that the spread you encounter can fluctuate based on market volatility and the specific currency pair you're trading. Variable spreads like these are common in markets characterized by higher volatility.

For example, during periods of low market activity and minimal volatility, a broker may impose a +3 pip spread. However, if volatility spikes or liquidity diminishes, the broker may adjust the spread to account for the heightened risk associated with a faster-moving and thinner market.

Additionally, some brokers may charge a commission for executing and handling trades. In such cases, the spread adjustment might be minimal or non-existent since the broker primarily earns revenue through these commissions.

Commissions

While certain accounts offer spreads as low as 0.1 pips for the EUR/USD currency pair, they may come with a commission per lot traded. These accounts are typically known as Electronic Communication Network (ECN accounts), operating without a dealing desk. Traders enjoy the raw spreads or something very close to them, while the broker levies a commission fee.

Commissions also apply to equity trades and various other assets such as ETFs, ETCs, and bonds. To understand which assets carry commission charges, traders should consult their broker's asset directory or find this information directly on their trading platform. Transparent brokers typically list comprehensive contract specifications on their website, while proprietary trading platforms provide all the necessary information within each trade ticket. Many brokers offer volume discounts for accounts that incur commission fees.

Commissions can be calculated in two primary ways:

Fixed fee. Under this model, the broker charges a fixed amount, regardless of the trade's size and volume. For example, a broker might charge a $2 commission per executed transaction, irrespective of its size.
Relative fee. This is the more common method of commission calculation. The amount a trader pays is determined by the trade's size. For instance, the broker may charge "$100 per $1 million in traded volume." In essence, the greater the trading volume, the higher the cash value of the commissions.

This apart, many brokers provide their clients with educational materials and analytical support, which helps to improve the knowledge and skills of traders. These resources may be free or offered for an additional fee, depending on the broker's policy.

Comparison of the different types of fees
Fee type	Description	Example
Spread	The difference between the bid (buy) and ask (sell) prices of a currency pair. Spreads can be fixed or variable, depending on the broker and market conditions.	For the EUR/USD pair, a broker may offer a spread of 0.6 pips.
Transaction fee	A fixed fee charged by the broker for each trade executed. Typically applied by ECN brokers offering tight spreads.	An ECN broker might charge $5 per standard lot (100,000 units of the base currency).
Swap (rollover)	The fee for holding an open position overnight. The swap is calculated based on the interest rate difference between the currencies in the pair and can be positive or negative.	For holding a EUR/USD position, the swap might be -0.78 pips for a long position and +0.17 pips for a short position.
Inactivity fee	A fee charged by brokers when there is no trading activity on the account for a specified period.	Some brokers charge $10 per month of inactivity if no trading operations occur on the account within 12 months.
Withdrawal fee	A fee for withdrawing funds from the trader’s account. The amount depends on the broker and the chosen withdrawal method.	A broker may charge $25 for a bank transfer or 1% of the amount for withdrawals via electronic payment systems.

Swap rates

Swap rates, also known as rollover rates, pertain to positions held overnight. These rates result from disparities in interest rates between the base currency and the quoted currency. Brokers will specify how they calculate these rates, and there are two types – Swap extLong and Swap Short rates. Depending on whether you hold a long or short position, swap rates will either be credited to or debited from your account balance. It's important to note that not all brokers pass on positive swap rates to traders.

Market gapping

For traders who specialize in news-based trading, the concept of market gapping becomes a significant concern. Gapping signifies abrupt and substantial price jumps that occur without any recorded prices in between two levels. This phenomenon often arises due to unforeseen economic data releases, political shifts, or major global events.

Gapping can manifest at any moment and is entirely beyond the control of individual traders. During periods of high market volatility, such as during the release of important economic reports, spreads can rapidly expand or contract by several pips. If your preferred trading strategy revolves around news events, it's crucial to factor in these potential costs and account for their impact.

Financing expenses

When initiating a leveraged trade, your broker imposes financing expenses. To illustrate, if your trading account holds $15,000, but your total position size reaches $150,000, you must borrow the remaining $135,000 from your broker and subsequently bear financing costs. These costs have the potential to influence your overall trading profitability and should be included in your trade planning.

Withdrawal fees

Upon successfully closing a profitable trade and electing to withdraw your earnings to your bank account, you may encounter a withdrawal fee, unless your broker offers a complimentary monthly withdrawal option.

What are the hidden Forex fees?

Storage fees

Some brokers impose storage fees on traders for maintaining certain assets in their accounts. These fees are an unnecessary addition and are incurred in addition to swap and financing fees. Essentially, they represent a cost for keeping positions within your portfolio. As an investor (not trader), it's advisable to avoid brokers who charge extremely high storage fees.

Custodial fees

Equity, ETFs, Forex and bonds might come with custodial fees, typically calculated as a small annualized percentage. Some brokers might deduct these fees monthly, setting a minimum threshold. It's important to note that not all brokers offer equity or bond trading; instead, they utilize CFDs (Contracts for Difference), which allow you to participate in price movements without incurring custodial fees.

Overnight positions

For traders holding positions overnight, there's an additional cost to consider. This cost primarily applies to the Forex market and is known as the overnight rollover.

Every currency you buy or sell comes with its own overnight interest rate. The difference between the interest rates of the currencies you're trading determines the cost of holding the position overnight. An important point to note however, is that these rates aren't determined by your broker but are set at the Interbank level.

These trading costs are percentage-based and escalate as you increase your use of leverage. In other words, the more leverage you employ, the higher these costs become. For instance, if you buy the GBP/USD pair, the rollover cost will hinge on the difference between the UK and USA interest rates. If the UK boasts a 5% interest rate and the USA offers 4%, you'll receive a payment of 1% on your position because you're buying the currency from the nation with the higher interest rate. Conversely, if you were selling this currency, you would be charged 1%.

Data feeds

Beyond the direct transactional costs of trading, traders should factor in additional expenses when calculating their overall profitability. Data feeds are a crucial part of this equation as they provide traders with real-time market information, including news updates and price action analysis.

Traders rely on this data to make vital decisions such as when to enter or exit the market, how to manage open positions, and where to set stop-loss orders. The quality and nature of data feeds can vary among providers, as can the associated costs, which are typically a fixed monthly charge.

Inactivity fees

Many brokers charge an inactivity fee if your account has no trading activity for a certain period. For example, some companies charge a $10 fee for accounts that have been inactive for more than a year.

How to avoid hidden fees

Hidden fees can add significant costs to a trader’s account, so they should be taken into account when choosing a broker and managing an account. Ways to avoid hidden fees:

Learn the broker’s terms. Before opening an account, carefully review the documents describing the fees and terms of service. Brokers often publish this information in the “Disclosure” or “Fees and Commissions” sections of their websites. Pay special attention to fees for inactivity, withdrawals, and account maintenance.
Choose brokers with a transparent fee structure. Some brokers offer accounts with minimal hidden costs. Such brokers often stand out due to their more transparent policies and fewer additional fees.
Keep your account active regularly. To avoid inactivity fees, it is enough to periodically make trades or log into the trading terminal. Even minimal transactions on the account will help keep it active. Some brokers only require symbolic activity, for example, once every few months.
Compare brokers. Using platforms to compare brokers will help you choose a company with the lowest hidden costs. Such resources analyze fees, including spreads, inactivity fees, and hidden costs, providing a comprehensive picture.
Study reviews and ratings. Reviews from other traders often contain useful information about the real costs of working with a particular broker. Ratings on specialized platforms such as Trustpilot or ForexPeaceArmy can help you identify hidden fees that may not be mentioned in official documents.
Use demo accounts. Before you start real trading, test the broker's services on a demo account. This will allow you to evaluate the transparency of calculations and identify possible additional costs before opening a real account.

What are the main types of accounts that a Forex broker provides?

Forex brokers typically provide various types of trading accounts, with two of the most widely used options being standard trading accounts and raw spread accounts. The choice between these accounts hinges on several factors, including your trading volume and strategy.

Standard accounts

Standard accounts serve as the entry point for retail traders in the Forex market. These accounts are characterized by how brokers make their profit, primarily through spreads. Spreads can vary, starting from 1 pip and increasing from there. The distinctive feature of standard accounts is that they do not impose any commission charges on trades. Instead, brokers generate revenue through the spread itself.

Professional or "Raw" accounts (ECN Accounts)

Professional accounts, often referred to as "raw" accounts or ECN (Electronic Communication Network) accounts, provide traders with access to real market prices for all available instruments. In these accounts, Forex brokers refrain from adding any markups to the Forex prices. As a result, spreads are typically extremely low, sometimes even reaching zero. However, there's a trade-off – traders using professional accounts are required to pay a commission fee for each trade executed.

The commission structure can vary among brokers. Some charge fees for both opening and closing trades, while others assess fees for a complete round-trip, which includes both the opening and closing of a lot. The choice between standard and professional accounts depends on your specific trading style and objectives.

Market maker vs ECN brokers: which to choose?

Understanding the differences between Market Maker and ECN models is important as they determine the fee structure and order execution conditions.

Market maker brokers

Market Maker brokers create their own market for their clients, setting buy and sell prices (bid and ask) based on internal algorithms. They act as a counterparty to clients' trades, ensuring liquidity and price stability.

Characteristics of market maker brokers:

Fixed spreads. Market Makers typically offer fixed spreads, which ensures predictability of trading costs.
No commissions on trades. The broker's profit is generated from the spread, so additional fees for order execution are usually not charged.

As a counterparty, there is a potential for conflict of interest, especially if the broker profits from clients' losses.

ECN brokers

ECN (Electronic Communication Network) brokers provide direct access to the interbank market, where client orders are matched with orders from other participants, including banks and financial institutions. The broker acts as an intermediary in this case, ensuring transparency and competitive prices.

Characteristics of ECN brokers:

Variable spreads. Spreads in ECN systems depend on market liquidity and can be very tight, especially during periods of high activity.
Trade fees. ECN brokers charge a fixed commission per lot, which compensates them for providing direct access to the market.

The broker is not a party to the transaction, which reduces the likelihood of conflicts of interest and increases trust on the part of the trader.

Comparison and choice

When choosing between a Market Maker and an ECN broker, you should consider the following aspects:

Get a clear picture of how trades are executed. When deciding between a Market Maker and an ECN broker, understand that Market Makers set their own prices, which means they might end up being the counterparty to your trades. This can create potential issues for fairness, especially if they benefit when you lose. ECN brokers match your orders directly with liquidity providers, giving you clearer, more straightforward pricing and no hidden conflicts, which might be more ideal if fairness is a priority for you.
Consider how much you’re paying per trade. While ECN brokers offer more competitive pricing with tight spreads, they often charge a commission per trade, which may be a concern if you're a smaller trader. Market Makers tend to offer easier-to-understand spreads, but they can widen drastically during volatile market conditions. If you're trading frequently and have a solid strategy, an ECN broker might work better for you, but if you're starting out and just making smaller trades, a Market Maker might offer you more stability as you grow.
Check how quickly orders are filled. Market Makers might offer slower execution during times of high volatility, as they are managing risk internally. This can lead to unexpected price shifts or slippage, which could affect the accuracy of your trades. On the other hand, ECN brokers directly match orders with liquidity providers, leading to faster execution speeds and reducing the chances of slippage, especially during market fluctuations.
More reasonable leverage. Market Makers tend to offer higher leverage options, which might be attractive for beginners looking to increase their position sizes. However, this comes with more risk. More reasonable leverage from ECN brokers might seem lower, but it can help you gain better control of your trades and build a safer trading environment in the long run.

Best Forex brokers fee and account types

Filtering out Forex brokers to avoid hidden fees and low-cost accounts is difficult considering the wide spectrum of options available. So to help you, we have presented these parameters for the top brokers in the table below. You can compare them by yourself and make the best choice for yourself:

Best Forex brokers
	Min. deposit, $	Max. leverage	Min Spread EUR/USD, pips	Max Spread EUR/USD, pips	Investor protection	Regulation level	TU overall score	Open an account
Plus500	100	1:300	0,5	0,9	€20,000 £85,000 SGD 75,000	Tier-1	6.83	Open an account Your capital is at risk.
Pepperstone		1:500	0,5	1,5	£85,000 €20,000 €100,000 (DE)	Tier-1	7.17	Open an account Your capital is at risk.
OANDA		1:200	0,1	0,5	£85,000 SGD 75,000 $500,000	Tier-1	6.79	Open an account Your capital is at risk.
FOREX.com	100	1:50	0,7	1,2	£85,000	Tier-1	6.95	Study review
Interactive Brokers		1:30	0,2	0,8	$500,000 £85,000	Tier-1	6.9	Open an account Your capital is at risk.

Top company reviews

9.4/10

Go to broker

Your capital is at risk.

Minimum deposit:

$100

Deposit Bonus:

Regulation:

FCA, CySEC, MAS, ASIC, FMA, FSA (Seychelles)

Review

Plus500 is an international fintech holding that offers CFD and options trading worldwide through its network of branches, as well as futures trading in the U.S. The company was established in 2008 in the Israel. It is regulated by the FCA, as well as by 9 financial supervisory authorities in other countries, such as CySEC (Cyprus), ASIC (Australia), MAS (Singapore), FSCA (South Africa), among others. Plus500 is listed on the London Stock Exchange (ticker: PLUS) and is part of the companies that make up the FTSE 250 stock index. Plus500 is a reliable intermediary for accessing financial markets, used by over 25 million traders worldwide.

Pros/Cons

•Multi-regulation — licensed in 10 countries;

•Wide range of trading instruments — over 2800;

•Highly functional trading platforms — browser and mobile versions;

•Transparent pricing model — Spreads and Additional fees;

•Automatic adjustment of trading conditions to meet regulatory requirements;

•Provision of educational content, free analytics, and demo accounts;

•Customizable trading alerts — both on the platform and through external communication channels.

•Lack of Micro or Cent-type accounts in its account lineup, which allow trading with minimal risks and investments;

•The Plus500 platform does not support automated trading;

•Some popular trader strategies are prohibited.

9.2/10

Go to broker

Your capital is at risk.
Your capital is at risk.

Minimum deposit:

Deposit Bonus:

Regulation:

ASIC, FCA, DFSA, BaFin, CMA, SCB, CySec

Review

Pepperstone (Pepperstone.com) was founded in 2010 in Melbourne, Australia, by professional traders who were not satisfied with the quality of services provided by most brokers. The founders decided to avoid many of the disadvantages of competitors, including high commissions, delayed execution of orders, etc. The founders therefore focused on improving the technical component. The company has set itself the goal of changing the “rules of the game” and setting the bar high for online trading.
Today, Pepperstone offers clients all over the world some of the best technological solutions and favorable trading conditions. The company also provides professional tools that help traders not only master the fine art of trading, but also significantly increase trading efficiencies. In addition, Pepperstone’s platform is scrutinized by seven regulatory authorities, including ASIC (Australian Securities and Investments Commission, AFSL No.414530), FCA (UK Financial Conduct Authority, 684312), DFSA (F004356), BaFin (151148), CMA, SCB (SIA-F217), and CySec (388/20). Moreover, with Pepperstone, clients' assets are maintained in aggregated accounts with several major, global banking institutions. These facts confirm the reliability of the company and guarantee the safety of the client's capital.

Pros/Cons

•Attractive trading conditions;

•Fast order execution - 30 ms on average;

•1,200+ trading instruments;

•Low fees; and

•No inactivity fee.

•Support service works only 24/7;

•No cent account;

•Not available to US clients;

•Limited passive trading opportunities;

•Limited analytical materials available on the site. The only way to resolve this issue is to connect to trading signals;

•No news section; and

•Demo accounts can only trade for free for 60 days.

9.1/10

Go to broker

Your capital is at risk.

Minimum deposit:

No minimum

Deposit Bonus:

Regulation:

FSC (BVI), ASIC, IIROC, FCA, CFTC, NFA

Review

The name OANDA is an acronym for “Olsen & Associates” or “Olsen AND Associates”. It is registered in the United States and provides its clients with a wide range of financial services in most countries of the world. The company was founded in 1996 and is currently regulated in four jurisdictions. The main regulator of the broker is the UK Financial Conduct Authority (FCA). Oanda Canada is licensed by IIROC. The company has several significant awards to its credit, including a victory in the category "Best Forex Trading Technologies" from the UK Forex Awards, "Best Trading Platform" from FX Week, as well as "Best Customer Service" from the US Foreign Exchange Report.

Pros/Cons

•Minimum deposit from 1 dollar.

•A large selection of the most popular trading instruments.

•Several reliable and reputable financial regulators.

•Inconvenient and poorly functioning site.

•Lack of cent accounts.

•Lack of bonus programs.

How spread widening and swap fees impact your trading costs and how to avoid them

One of the most overlooked costs in Forex trading is the spread widening during high volatility. While many beginners focus on fixed commissions or overnight fees, they often forget that the spread — the difference between the bid and ask price — can fluctuate. During times of high market volatility, this spread can expand significantly, increasing the cost of your trade without any clear indication until you place the order. For traders looking to minimize these hidden costs, it’s crucial to track market news and choose brokers who offer dynamic spreads or low fixed spreads during key market events, so you know exactly what you're paying. Being aware of this will prevent surprise fees and help you better plan your trades, especially if you're trading in fast-moving markets like Forex.

Another hidden cost comes from swap fees, also known as overnight financing charges. While many brokers advertise "zero spread" or "low commissions," they often charge high swap fees if you leave positions open overnight. These fees can add up over time, especially for traders holding positions longer than a day. Swap rates vary depending on currency pairs, interest rates, and the broker's policy, and can significantly affect long-term trades. Beginners should always check the swap rates for their currency pairs before entering trades that require holding overnight, and consider using brokers that offer swap-free accounts for those who want to avoid this cost altogether.

Conclusion

Forex trading comes with many costs, including overt commissions and hidden fees, that need to be taken into account for successful money management. Understanding the structure of spreads, transaction fees, swaps, and additional costs such as inactivity or withdrawal fees helps minimize unexpected costs. When choosing a broker, carefully examine the terms, including transparency of calculations and availability of detailed information on all possible fees. Using a demo account and regularly comparing offers from different companies allows you to choose the most favorable trading conditions. Paying close attention to costs not only reduces losses, but also helps improve the overall efficiency of trading operations. By choosing a broker and strategy consciously, traders can significantly improve their results.

FAQs

What additional costs may arise when using leverage?

When trading with leverage, financing costs increase, especially if positions are held for several days. These costs include higher swaps and possible additional overnight fees. Keep these costs in mind when planning long-term trades.

How do I calculate the true cost of a spread for large trading volumes?

To calculate the true cost, multiply the spread in pips by the pip value for the selected trade size. For example, for a 1 lot trade with a 2 pip spread, the cost is $20 (with a standard pip of $10).

What fees may arise when funding an account?

Some brokers charge a fee for deposits, especially if international bank wires or payment systems are used. Check if there are minimum thresholds for free funding and what fees are associated with different methods.

How do hidden fees affect scalping?

With frequent trades, typical for scalping, even small hidden fees, such as additional execution fees or increased spreads during volatility, can significantly reduce profits. Analyze contract specifications before choosing a trading instrument.

Team that worked on the article

Maxim Nechiporenko has been a contributor to Traders Union since 2023. He started his professional career in the media in 2006. He has expertise in finance and investment, and his field of interest covers all aspects of geoeconomics. Maxim provides up-to-date information on trading, cryptocurrencies and other financial instruments. He regularly updates his knowledge to keep abreast of the latest innovations and trends in the market.

Learn about our editorial policies

Chinmay Soni is a financial analyst with more than 5 years of experience in working with stocks, Forex, derivatives, and other assets. As a founder of a boutique research firm and an active researcher, he covers various industries and fields, providing insights backed by statistical data. He is also an educator in the field of finance and technology.

As an author for Traders Union, he contributes his deep analytical insights on various topics, taking into account various aspects.

Mirjan Hipolito is a journalist and news editor at Traders Union. She is an expert crypto writer with five years of experience in the financial markets. Her specialties are daily market news, price predictions, and Initial Coin Offerings (ICO).

Leverage

Forex leverage is a tool enabling traders to control larger positions with a relatively small amount of capital, amplifying potential profits and losses based on the chosen leverage ratio.

Volatility

Volatility refers to the degree of variation or fluctuation in the price or value of a financial asset, such as stocks, bonds, or cryptocurrencies, over a period of time. Higher volatility indicates that an asset's price is experiencing more significant and rapid price swings, while lower volatility suggests relatively stable and gradual price movements.

Brokerage fee

A brokerage fee, also known as a commission, is a fee charged by a brokerage or financial institution for facilitating and executing financial transactions on behalf of clients. Brokerage fees are typically associated with services related to buying or selling assets such as stocks, bonds, commodities, or mutual funds.

Investor

An investor is an individual, who invests money in an asset with the expectation that its value would appreciate in the future. The asset can be anything, including a bond, debenture, mutual fund, equity, gold, silver, exchange-traded funds (ETFs), and real-estate property.

Long position

A long position in Forex, represents a positive outlook on the future value of a currency pair. When a trader assumes a long position, they are essentially placing a bet that the base currency in the pair will appreciate in value compared to the quote currency.