Account types: standard, raw spread, cent
What you learn in 3 minutesTwo people open the same EUR/USD trade on the same day. One pays mostly through the spread. The other pays a tighter spread plus a commission. The total cost can be close, but the way it is charged is different, and that difference matters when you compare accounts.
One round trip on EUR/USD: 1.5 pips versus 0.3 pips plus KSh 400
| Step | Amount | Note |
|---|---|---|
| Standard account spread | 1.5 pips | The quoted difference between buy and sell price on a standard account. |
| Standard account cost on one standard lot | KSh 1,627.50 | 1.5 pips x 10 units of quote currency per pip x KES 108.50 per unit. |
| Raw spread account spread | 0.3 pips | The quoted difference between buy and sell price on a raw spread account. |
| Raw spread account spread cost on one standard lot | KSh 325.50 | 0.3 pips x 10 units of quote currency per pip x KES 108.50 per unit. |
| Raw spread account commission | KSh 400 | A round-trip commission quoted by the broker. This figure varies between brokers. |
| Raw spread account total cost | KSh 725.50 | KSh 325.50 spread cost plus KSh 400 commission. |
| Difference | KSh 902.00 | KSh 1,627.50 minus KSh 725.50. The raw spread account costs less on this trade. |
The broker may round the spread, charge commission per side rather than round trip, add a swap if the position is held overnight, or apply a different conversion rate. Check the contract specifications for the account you are comparing.
The mistake people make here
The common mistake is to look only at the spread and call the raw spread account cheap, or to look only at the commission and call it expensive. Both numbers belong to the same trade. Work out the total cost in shillings for one round trip on the position size you actually use, then compare. Also remember that a cent account does not lower the cost per pip. It lowers the size of the position, so the same pip movement is worth less money.Check yourself
On a standard account with a 1.2 pip spread, what is the spread cost on one standard lot of EUR/USD if one pip is worth KSh 1,085?
1.2 pips x KSh 1,085 per pip = KSh 1,302.
On a raw spread account with a 0.4 pip spread and a KSh 300 round-trip commission, what is the total cost on one standard lot if one pip is worth KSh 1,085?
Spread cost: 0.4 pips x KSh 1,085 = KSh 434. Total cost: KSh 434 + KSh 300 = KSh 734.
A cent account uses one tenth of a standard lot. If one pip on a standard lot is KSh 1,085, what is one pip worth on the cent account?
KSh 1,085 / 10 = KSh 108.50.