Retail forex has been in a race to low-cost trading for years, showing tempting numbers like 0.0 pips or $2.5 commission per lot. It’s a brilliant distraction as raw spread is an obvious metric that brokers can control and use to obscure the actual cost of trading.
In FXCM’s Slippage Statistics, 52.21% of stop orders had negative slippage in 2024. Yet, the reason brokers push spreads as the primary focus is simple: they are easy to understand and compare.
Does raw spread always mean the best deal? The reality is far more complex as there’re hidden costs that traders must take into account. At FXtremes, we only show features traders can reasonably or consistently get, and after this article you’ll understand why ‘the lowest spread’ isn’t one of them.
What we’ll cover:
- How the ‘raw spread’ concept came into prominence
- Psychological trap most retail traders fall into
- Hidden but important costs every trader must know
- Which strategies are most sensitive to brokers’ fees
- Best practices to find low-cost forex brokers
Why you see raw spread everywhere
Competition is tough among thousands of brokers and raw spread has become the symbol of low-cost trading, and it’s been a race to the bottom ever since.
What is raw spread
Raw spread is the difference between the bid (buy) price and the ask (sell) price, streamed directly from a broker’s liquidity providers without markup. The term is mostly associated with ECN (Electronic Communication Network) and STP (Straight Through Processing) models.
The forex industry has undergone a dramatic shift over the past two decades. In the early 2000s, fixed spreads of 3 pips on major pairs were standard. Then came ECN and STP, promising direct market access with spreads as low as 0.0 pips. The price war was on with brokers slashing fees from $7 per lot to $5 and $3.
Why trade with raw spread
Raw spread is meant to be a reflection of the real market, offering a clear and competitive pricing for active traders.
Under normal market conditions, spreads can be extremely low. For example, if the bid for EURUSD is 1.2000 and the ask is 1.2001, the spread is 0.1 pips. Unlike standard accounts with 1.2 pips for example, which include the broker’s profit margin, raw accounts only charge a fixed commission per trade.
Traders can see what the market is offering and that’s why raw accounts are favoured by professional traders, scalpers and anyone who needs tight pricing and greater transparency.
What is the psychological trap
Raw spread accounts became an instant hit as traders can easily see that 0.0 pips looks better than 1 pip. This led to obsessive spread-shopping among retail guys who compared spread tables, hunted for the tightest quotes, convinced they were making a rational decision.
However, there’s a catch! They focus on tiny differences that don’t matter: 0.1 pips saved here, $0.50 commission slashed there while ignoring the costs that actually drain accounts:
- They don’t measure the gap between quote and actual trade prices.
- They don’t track how often their stops get filled at worse prices.
- They don’t add up swap rates on positions held overnight.
- They don’t question why their backtested strategy fails to make money.
Brokers love this! Trading dashboards highlight spread and home pages focus on speed and low cost. The business is designed to incentivise over-trading. The more you trade, the more you pay, regardless of how tight the spread is on your screen.
What are the real costs of trading
Slippage and swaps are the least advertised costs, yet they may have a huge impact on your P&L.
How slippage impact trading
Often considered the hidden cost of trading, slippage is the difference between the price you see and the price you actually get. You’ll only notice the difference once the trade is done, but it can exceed the ‘raw spread’ you were expecting to pay. That’s why slippage is the true spread!
Negative slippage where you’re filled at a worse price than quoted is the norm. A broker can quote 0.0 pips at the top of the book, but if there’s not enough volume behind that price, your market order will walk through multiple levels, eating into your profit with every tick.
Yet you’ll rarely see positive slippage advertised as brokers aren’t incentivised to give you better fills than necessary.
How poor execution lowers profit
Real market access means rejection, requoting or partial fills, and raw prices don’t matter if your order doesn’t execute properly. On the other hand, reputable market makers offer more consistent fills, which can be a solid option if traders can tell apart myth from reality.
There’s an enormous difference between institutional liquidity and cheap aggregation. Some brokers connect to top-tier banks, others pull quotes from second- or third-tier liquidity providers or worse, generate synthetic pricing internally with minimal market depth.
Poor liquidity means effective spreads can be many times wide and wild. You might see 0.0 pips, but the moment you place a trade of meaningful size, the market moves against you.
Finally, can your broker handle volatile markets? A 0.0-pip spread becomes irrelevant when your entry gets rejected during news or your stop is skipped during a gap. This happens constantly because of weak execution infrastructure or a lack of best execution policy.
How swaps may kill your strategy
Swap rates vary wildly between brokers as they can quote whatever they want, because most retail folks don’t bother to compare. These costs can quietly erase profitability on strategies that hold positions overnight.
A broker giving raw accounts might compensate with higher swap differentials, charging more or paying less than competitors. This is why swap tables are forgotten in marketing materials, buried in contract specifications that most traders never read.
Know your real cost
Effective execution price is your real cost of trading, and any trader will be much better off by taking into account these metrics:
- Average slippage on market orders, stop losses and limit orders
- Swap rates
- Rejection and requote rates
Think about it, 1 pip slippage here and 40% swap markup there, is your ‘raw spread’ account really low cost?
Is raw spread an important criteria
Raw spread by itself is not necessarily a better deal as you also need to factor in volatility, market session and the broker’s execution policy, which can’t guarantee the lowest spread.
Who needs raw spread most
Each trading style has its tolerance to different cost components, and understanding your strategy’s sensitivity is the starting point for comparing brokers.
- Scalpers need fast execution and minimal slippage.
- Swing traders need competitive swaps but can absorb slightly wider spreads.
- Position traders need low financing costs above all else.
- Carry traders demand best swaps to capture interest rate differentials.
Match the broker’s cost structure with your needs, not to the lowest number on their homepage. This is the reason why at FXtremes, we do not show ‘the lowest spreads’.
Why execution quality is more important
Subpar execution leads to worse trading experience, and many traders have ended up paying the price with their equity and mental wellness. Even for scalpers, grid systems and algo traders, consistency matters more. A single instance of slippage, partial fill or delay can invalidate an entire strategy’s edge.
The term ‘raw’ has no regulatory definition. Any broker can call their pricing raw even if they aggregate quotes or run risk management filters. Dialing up slippage isn’t breaking any rules, some can simply exploit the gap between perception and reality.
From a business point of view, ‘0.0-pip spread’ works like the ‘from $X’ price tag you see in shops. It’s just a starting point, a best-case scenario that exists only under perfect conditions.
This has a huge impact as many strategies specifically target high-volatility, such as news traders, breakout systems or momentum algos. The ‘raw’ price is not available during the market conditions that matter most to them.
Conflicts of interest are baked into ultra-cheap pricing models. When a broker offers spreads so tight that they are barely covering operating costs, they have to make money elsewhere. That might mean slower execution, aggressive stop-hunting or quite often trading against their clients. These are the true costs of ‘low-cost’ trading.
What institutions care about
Professional traders and institutions don’t chase 0.0 pips. They prioritise market impact, book depth, routing stability and financing agreements. They understand that execution quality is the number one criteria. The retail model, by contrast, is built around marketing appeal because brokers know that most traders lack the tools and sophistication to measure execution costs.
Case studies: when ‘raw spread’ traders pay more
Consider trading EURUSD on two accounts with the same $6 commission:
| EURUSD (1 lot) | Account A | Account B |
|---|---|---|
| Spread | 0.0-pip | 0.3-pip |
| Average slippage | 0.6 pips | 0.1 pips |
| Total cost (round trip) | $24 (6*2+6*2) | $20 (3*2+6*2+1*2) |
On paper, account A looks much cheaper, $12 (6*2) per round trip versus B’s $18 (3*2 + 6*2). But in practice, A’s market order fills give 0.6 pips of slippage on average, while B’s better liquidity delivers fills near requested prices.
Over 100 trades, that $4 per trade means a $400 hole in account A, and that’s before we consider rejections during news, forcing the trader to re-enter at worse prices or miss setups.
Another example of holding gold overnight:
| Gold (1 lot) | Account A | Account B |
|---|---|---|
| Spread | 30 cents | 60 cents |
| Cost (round trip) | $60 (0.3*100*2) | $120 (0.6*100*2) |
| Swap charge (long) | $100 | $80 |
That’s a $100 (20*5) difference in swaps each week. For traders riding a 3-month long rally that’s $1200 less on the A account P&L. While the spread difference may allow the account to save merely $60 on entry and exit.
Here’s the worst case scenario, if a trader was holding onto a loser while getting charged on swaps, trading with A would be like rubbing salt on the wound.
How traders should compare low-cost forex brokers
Here are best practices for traders to choose better trade execution.
- Keep slippage logs: Record the price you saw versus the price you received on every trade. This includes market, stop and limit orders.
- Test fill speeds by placing small orders during different market conditions and noting how quickly they execute.
- Do order-level analysis: compare actual entry and exit prices to the mid-price at the time your order was triggered. This data will reveal far more about true trading costs than any marketing material ever will.
- Calculate your all-in cost per trade: spread + commission + average slippage + swap. Do this across multiple brokers using the same setups in the same market conditions.
Don’t confuse visible costs with actual costs. Understanding true low-cost trading and how to find it will help traders lift their equity curve.
Conclusion
Let’s face it, raw spread is a convenient distraction. It’s the cost brokers want you to focus on because it’s the cost they can control and make to appear competitive. True cost lives in execution quality and financing.
Serious traders look at the hard numbers and understand that a 0.0 pips offer with poor fills will end up costing them more. If you’re choosing brokers based only on spreads and commissions, you’re playing their game. Start quantifying what actually matters like a real trader and your account balance will thank you.
Frequently asked questions
Is raw spread the same as zero spread?
No. Raw spreads can drop to 0.0 pips at times, but they still move with market liquidity, whereas ‘zero spread’ offers are usually marketing labels where the broker may charge higher commissions or use conditions that make the overall cost similar or higher than a raw account.
Are raw spread accounts always cheaper than standard accounts?
Not always. While raw spreads are usually tighter, you must add commissions, slippage and swaps to get the true all‑in cost. In volatile conditions a standard account with a wider but stable spread can be cheaper on a per‑trade basis.
Who are raw spread accounts best for?
Raw spread accounts tend to suit scalpers, day traders and high‑frequency strategies that rely on tight pricing, if execution quality is robust and commissions are competitive.
What costs do traders often overlook when choosing a raw spread account?
Traders commonly underestimate the impact of negative slippage, variable execution speed and swaps, all of which can outweigh the small advantage of a very tight spread over time.
How should I compare a raw spread with a standard account?
Track the effective cost per trade in pips or dollar value, including spread, commission, average slippage and swap charges for your actual trade sizes and holding times, then compare totals across at least 50 trades.
Do raw spread accounts guarantee better execution?
No. Raw pricing only describes how the spread is quoted. Execution quality still depends on the broker’s technology, liquidity providers and dealing policies, so poor execution can turn a tight raw spread into a very expensive fill in practice.
Can beginners use raw spread accounts?
Beginners can use them, but many find standard accounts simpler because the commission is baked into the spread. Raw accounts are often better once a trader understands cost analysis.