The three costs: spread, commission, swap
Spread as the first cost of every position
A trader in Mumbai watched USD/INR on a screen. The buy price was 83.2500 and the sell price was 83.2388. The gap between them was 1.2 pips. That gap is the spread. It is the first cost you meet, and you pay it the moment you open a trade.
On USD/INR, one pip is ₹10 on a standard lot. That is a fixed value for this instrument. So a spread of 1.2 pips costs ₹12 on a standard lot. If you trade a mini lot, which is one tenth of a standard lot, the pip value is ₹1, and the same spread costs ₹1.20. The spread is quoted in pips, but your account is in rupees, so you convert it using the pip value for your lot size.
The spread is not a fee that appears on a statement. It is built into the price. When you buy, you start from the higher price. When you sell, you start from the lower price. To break even, the market must move in your favour by at least the spread. A common mistake is to think the spread is small and ignore it. On a short trade, it can be the difference between a small gain and a small loss.
Commission on some account types
Not every broker charges a commission. Some accounts have a wider spread and no separate commission. Others have a very tight spread and a commission on each side of the trade. The two models can work out to a similar total cost, but the way you add them up is different. You need to know which model your account uses before you trade.
When a commission is charged, it is usually a fixed amount per lot per side. For example, a broker might charge ₹7 per standard lot to open and ₹7 to close. That is ₹14 for a round trip. If you trade two standard lots, the commission is ₹28. The commission is separate from the spread, so you add it to the spread cost to get the total cost of the round trip.
The commission is known before you trade. It is listed on the broker's website or in the account agreement. If you are unsure, check the contract specifications for USD/INR. The commission can vary between brokers and between account types at the same broker. It does not change with the size of the price move. It is a fixed cost per lot, so it matters more on small trades than on large ones.
Swap for holding a position overnight
A swap is the cost of holding a position past the daily cut-off time, which is usually 5 pm New York time. It is not a fee charged by the broker alone. It comes from the difference in interest rates between the two currencies in the pair. For USD/INR, you are effectively borrowing one currency to hold the other. The swap is the interest you pay or receive for that borrowing.
The swap is quoted in pips or in rupees per lot per night. It can be positive or negative. If it is positive, it adds to your account. If it is negative, it subtracts. For example, a swap of ₹5 per night on a standard lot means that after two nights you have paid ₹10. The swap is applied for every night the position stays open. If you open and close within the same day, you pay no swap.
Swap rates change daily. They depend on interest rate expectations and on the broker's markup. A broker may add a small percentage to the swap rate. The swap is known before you trade: it is shown in the contract specifications. But it is not fixed for the life of the trade. It can change from one night to the next. If you plan to hold for several days, check the swap rate each day. The total swap cost is the sum of each night's rate.
Cost of a 1 standard lot USD/INR round trip
| Step | Amount | Note |
|---|---|---|
| Spread on entry | ₹12 | 1.2 pips at ₹10 per pip on one standard lot |
| Commission | ₹7 | A fixed charge on some account types, converted from dollars at the rate your broker uses |
| Total cost to open and close | ₹19 | Spread plus commission, before any swap |
The broker may round the spread, add a markup, or charge a different commission. Swap is added for every night the position is held, and it varies by broker and by day.
Doing it once, step by step
You will now work through a complete cost calculation for a USD/INR trade, using the three costs you have just read about. Do this once on paper or in a spreadsheet, then repeat it on a demo account.
- 01
Find the pip value for your lot size
On a standard lot of USD/INR, one pip is ₹10. If you trade a mini lot, one pip is ₹1. If you trade a micro lot, one pip is ₹0.10. Write down the pip value for the lot size you plan to use. This number converts every pip cost into rupees.
- 02
Note the spread in pips
Look at the buy and sell prices for USD/INR. The difference is the spread in pips. For example, if the buy price is 83.2500 and the sell price is 83.2388, the spread is 1.2 pips. Multiply the spread by the pip value to get the spread cost in rupees. On a standard lot, 1.2 pips × ₹10 = ₹12.
- 03
Add the commission for your account type
Check whether your account charges a commission. If it does, find the amount per lot per side. For a standard lot, it might be ₹7 to open and ₹7 to close, so ₹14 for the round trip. Add this to the spread cost. If your account has no commission, add nothing.
- 04
Estimate the swap for each night held
Decide how many nights you expect to hold the position. Find the current swap rate for USD/INR in the contract specifications. Multiply the swap per night by the number of nights. If the swap is negative, add it to your cost. If it is positive, subtract it. For two nights at ₹5 per night, the swap cost is ₹10.
- 05
Total the three costs before you trade
Add the spread cost, the commission, and the swap. For a standard lot with a 1.2 pip spread, ₹7 commission per side, and two nights at ₹5 swap, the total is ₹12 + ₹14 + ₹10 = ₹36. This is the amount the market must move in your favour just to break even. Write it down before you click buy or sell.
- 06
Repeat on a demo account
Open a demo account with the broker you are considering. Place a small USD/INR trade and hold it for one night. Check the statement the next day. Compare the costs you calculated with the costs shown. Adjust your method if they differ. Do this a few times until the numbers feel familiar.
The mistake most people make here
The common mistake is to look only at the spread and forget the commission and swap. A trade that seems to break even after a small price move can still lose money once all three costs are counted. Before entering, check the spread, the commission for your account type, and the swap rate for the instrument. If you plan to hold overnight, add the swap to your cost. Do this on a demo account first, using small amounts, so the numbers become familiar.Check yourself
On one standard lot of USD/INR, the spread is 1.2 pips and the commission is ₹7. What is the total cost to open and close the trade, before swap?
1.2 pips × ₹10 per pip = ₹12. Add the commission of ₹7. Total = ₹19.
If you hold the position for two nights and the swap is ₹5 per night, what is the total cost now?
Start with ₹19. Add 2 nights × ₹5 = ₹10. Total = ₹29.
Questions that come up next
How do I find the pip value for a lot size other than the standard one?
The pip value scales with the lot size. On USD/INR, one pip is ₹10 on a standard lot, ₹1 on a mini lot, and ₹0.10 on a micro lot. Divide the standard pip value by ten for each step down in size. Your broker's contract specifications list the pip value for each lot size, so check that page before you trade.
Does the spread stay the same all day?
No. The spread widens when trading is thin, such as late in the Indian evening or around major news releases. It narrows when many buyers and sellers are active. A spread you saw at one moment is not a promise for the next. Check the live quote on your platform before you enter.
Why is the swap charged for every night and not just once?
Swap is a daily financing charge, not a one-off fee. Each night the position stays open, the charge is applied again. A position held for five nights pays five times the nightly swap. This is why the holding period changes the total cost, even when the price does not move.
Can the swap be positive, so the broker pays me?
On some instruments and some days, the swap can be positive. That depends on the interest rate difference between the two currencies and on the broker's markup. It is not something you can rely on, and it varies between brokers. Treat swap as a cost you check, not as a source of income.
Do all brokers charge commission on USD/INR?
No. Some accounts charge a commission and show a tighter spread. Others charge no commission and show a wider spread. The two models can add up to a similar total. Which one suits you depends on how often you trade and how long you hold.
How do I pay money into a trading account in India?
Funding is usually done by UPI or bank transfer, and the money reaches your trading account in rupees. The broker is registered with SEBI, so check the registration before sending funds. Keep the payment reference, because it is your proof if a transfer is delayed.
The words used on this page
- Spread
- The gap between the buy price and the sell price of an instrument. You pay it the moment you open a trade, because you start from the less favourable side.
- Pip
- A small unit used to measure price movement in a currency pair. On USD/INR, one pip is worth ₹10 on a standard lot.
- Commission
- A fixed charge some brokers make on each side of a trade. It is separate from the spread and does not change with the size of the price move.
- Swap
- A daily financing charge for holding a position past the cut-off time. It is applied again for each night the position stays open.
- Round trip
- One complete trade, from opening the position to closing it. Costs are usually added up over the round trip, not just the entry.
- Lot size
- The amount of the instrument in one trade. A standard lot, a mini lot and a micro lot each have a different pip value.
What to take away
- Every position carries a spread, and some accounts also carry a commission.
- Swap is added for each night the position stays open, so holding time changes the total cost.
- All three costs are known before you trade, so add them up first.
- A price move that looks like a break-even can still leave the account lower once the three costs are counted.