Spreads, fees and how brokers actually make money
'Zero commission' is rarely free. Here's how spreads work, the other costs to watch, and how to compare brokers on what you'll really pay.
Key takeaways
- The spread is the gap between the buy and sell price — a cost you pay instantly.
- Watch for commissions, overnight (swap) fees, withdrawal and inactivity fees.
- 'Commission-free' usually just means the cost is baked into the spread.
Brokers aren't charities, and that's fine — but you should know exactly how they get paid, because it comes out of your results.
The spread
At any moment there's a price to buy and a slightly lower price to sell. The gap between them is the spread, and you pay it the instant you open a trade — you start every position slightly in the red. Tighter spreads mean lower costs.
Quick example
If EUR/USD is quoted 1.1000 / 1.1001, the spread is 1 'pip'. Buy at 1.1001 and the price must rise past that just for you to break even.
The other costs to check
- Commission — a flat fee per trade on some account types (often paired with very tight spreads)
- Overnight / swap fees — charged to hold leveraged positions overnight
- Withdrawal fees — what it costs to take your money out
- Inactivity fees — charged if you don't trade for a while
- Currency conversion — if you fund in a different currency than your account
How brokers make money
Mostly through spreads and commissions on your trading volume, plus the fees above. That's why a flashy 'zero-commission' headline can still be more expensive than a commission account with razor-thin spreads.
Read past the headline
Compare the all-in cost — spread plus commission plus the fees you'll actually trigger — not just the one number the marketing leads with.
“Costs are the one part of trading you can control with certainty. Lower them, and you keep more of whatever the market gives you.”