Understanding Spreads, Commissions and Hidden Fees

Cost is the most predictable variable in trading. Returns are uncertain; fees are close to guaranteed. A trader who reduces annual cost by one percentage point has produced a more reliable improvement than one who adds an indicator.

The spread

The spread is the difference between the bid and ask. It is paid the moment a position opens, and it widens during volatility, at session opens, and around scheduled news. Advertised spreads are typically best-case averages measured in calm conditions.

Commissions

Commission models charge a fixed or percentage amount per side. A tighter spread with a commission is frequently cheaper than a wide zero-commission spread. Comparing platforms requires converting both into a single round-trip cost per unit of exposure.

Overnight financing

Leveraged positions held overnight incur financing, quoted as a daily rate. Over a month, financing can exceed the spread by a wide margin for slower strategies. Any platform's financing schedule should be located and read before capital is committed.

Currency conversion

If your account currency differs from the instrument currency, every trade may carry a conversion charge on entry, exit, and on any profit or loss. This is one of the most commonly overlooked costs in retail trading.

• Deposit fees, sometimes method-dependent.
• Withdrawal fees, including intermediary bank charges.
• Inactivity or dormancy fees after a defined period.
• Market data subscriptions for certain instrument classes.

Cost and strategy fit

High-frequency approaches are dominated by spread and commission; multi-week approaches are dominated by financing and conversion. The cheapest platform for one strategy can be the most expensive for another, which is why a single ranking of providers is rarely meaningful.

Our LW Management review documents which of these cost lines are publicly disclosed and which are not, using the same one-page audit described here.