Key takeaways
- Compare total trading costs rather than the advertised spread alone.
- Overnight financing depends on the instrument, account and provider’s calculation method.
- Slippage can be favourable or unfavourable; a requested price is not always an execution price.
- Limit orders control the acceptable price but may remain unfilled.
A strategy can appear profitable on a chart and still lose money after execution costs. The difference is especially important when trades are frequent or the expected gain per trade is small.
Spreads, overnight financing and slippage affect performance in different ways. Understanding each one helps you compare accounts, test strategies realistically and explain why a live result differs from a backtest.
The spread: the gap between bid and ask
The bid is the price at which you can normally sell, while the ask is the price at which you can normally buy. Their difference is the spread. An immediate buy and sell at unchanged quotes would therefore produce a loss equal to that gap, before other charges.
Consider a hypothetical EUR/USD quote of 1.1000 bid and 1.1002 ask. The spread is 0.0002, or two pips. For 100,000 euros, that difference is USD 20; for 10,000 euros it is USD 2; for 1,000 euros it is USD 0.20. This example assumes a USD-quoted pair and excludes commissions, financing and conversion charges.
Repeated trading magnifies small costs. Ten unchanged-quote round trips of 100,000 euros would represent USD 200 in spread costs under those assumptions. Actual spreads and trade sizes vary, so use your own execution records.
Compare account pricing as a whole
A low-spread account may charge a separate commission. Fixed-spread pricing may have conditions or exceptions, while variable spreads can widen as liquidity changes. Labels such as ECN or STP do not, by themselves, prove lower overall costs or better execution.
Compare the spread during the hours you trade, commissions on each side, minimum fees and currency conversion. A headline minimum spread is less useful than the costs your actual activity incurs.
Swaps and overnight financing
Holding a leveraged position across a provider’s rollover time may create a debit or credit. Currency interest-rate differences are relevant, but the provider’s rates, mark-ups, contract specification and calculation method also matter. Buying a higher-yielding currency does not guarantee a positive credit.
There is no single swap formula that applies to every account. A specification may express financing in points, currency per lot or an annual percentage. Confirm the units and any conversion before calculating the expected charge.
As a simple hypothetical example, a debit of USD 3 per lot per chargeable night on 0.5 lots over four chargeable nights totals USD 6. This example assumes an unchanged rate and a currency-per-lot method. It is not a quoted Deriv rate.
Weekend and holiday adjustments can result in multiple-day charges, but the day and rollover time vary by instrument and provider. Check the schedule instead of assuming every position has a Wednesday triple charge. Swap-free accounts may have separate conditions or administration charges.
Slippage: the difference between request and fill
Slippage occurs when execution differs from the price expected when an order was placed or triggered. It can improve or worsen a result. Fast markets, gaps, order size and available liquidity can influence it.
A hypothetical GBP/USD buy expected at 1.2500 but filled at 1.2520 has 20 pips of adverse slippage. At 100,000 pounds, that is USD 200. Record the actual fill; a chart screenshot may not show the executable quote available at that moment.
Match the order type to the trade-off
A limit order sets a maximum buy price or minimum sell price but does not guarantee a fill. A stop-limit order can remain unexecuted after its trigger if price moves beyond the limit. A market or ordinary stop order prioritises execution differently and can fill away from the expected level, subject to the provider’s rules.
Build costs into your review
- Record spreads, commissions, financing and requested-versus-filled prices.
- Test results using realistic costs and a more demanding cost scenario.
- Check rollover schedules and contract specifications before holding overnight.
- Compare net results across account types rather than choosing by marketing labels.
Further reading
Turn understanding into practice.
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