What Are Forex Spreads and Why Do They Matter?
Every time you open a forex trade, you pay the spread — the difference between the price your broker shows you to buy a currency pair (the ask) and the price at which you can sell it (the bid). If EUR/USD is quoted as 1.08501 / 1.08510, the spread is 0.9 pips. You are immediately in a 0.9-pip loss the moment the trade opens, because the market would need to move 0.9 pips in your favour just to break even.
For casual traders making a few trades a week, a 1-pip spread feels insignificant. Run the numbers for an active trader, and the picture changes dramatically. A scalper executing 20 round-turn trades per day on 1-standard-lot positions pays approximately $20 per day in spread costs at 1.0 pip, or $5,200 per year — assuming 260 trading days. The same trader using a raw-spread ECN account paying 0.0 pips plus a $7 commission per round turn pays $7 per lot, or $1,820 per year in total cost. That is a difference of $3,380 annually from broker choice alone, before a single pip of market movement is considered.
Understanding how spreads work, how brokers profit from them, and how to find brokers with genuinely low costs is therefore one of the most valuable exercises any trader can undertake. This guide breaks it all down with verified 2026 data.
Raw Spreads vs Standard Spreads Explained
Not all spreads are created equal. There are two fundamentally different pricing models in retail forex, and confusing them leads to poor broker decisions.
Standard (Mark-Up) Spreads
Most high-street and beginner-focused brokers use a standard spread model. The broker obtains interbank pricing — say 0.1 pips on EUR/USD — and then adds a mark-up, widening the spread to 1.0–1.5 pips before presenting it to you. The mark-up is the broker's profit. There is no separate commission charged. This model is simpler and more transparent to beginners, because the total cost of the trade is visible upfront in the spread. The disadvantage is that you consistently pay more than the underlying market price, and the mark-up can widen further during volatile market conditions.
Raw (ECN/STP) Spreads
Raw spread accounts pass the genuine interbank price through to you — sometimes as tight as 0.0 pips on major pairs — and charge a separate flat commission per lot traded. The commission is fixed (typically $3.50 per side, or $7 per round turn on a standard lot), making total costs predictable. Raw spread brokers operate as ECN (Electronic Communication Network) or STP (Straight Through Processing) firms, meaning your orders are passed directly to liquidity providers without a dealing desk intervening. This eliminates the conflict of interest inherent in market-maker models, where the broker profits when you lose.
EUR/USD Spread Comparison: Top 5 Brokers (April 2026)
The following data is based on live spread measurements taken during normal London and New York session trading hours in Q1 2026. Spreads during news events or low-liquidity hours will be wider for all brokers.
| Broker | Account Type | EUR/USD Spread | Commission (RT) | Total Cost (1 lot) |
|---|---|---|---|---|
| IC Markets Joint Best | Raw Spread | 0.0 pips avg | $7.00 RT | ~$7.00 |
| Exness Joint Best | Raw Spread | 0.0 pips avg | $7.00 RT | ~$7.00 |
| Pepperstone | Razor | 0.09 pips avg | $7.00 RT | ~$7.90 |
| XM | Zero | 0.0 pips avg | $7.00 RT | ~$7.00 |
| FxPro | cTrader | 0.6 pips avg | $7.00 RT | ~$13.00 |
RT = Round Turn (open + close). Data based on EUR/USD measured during standard London/New York overlap sessions. Spreads may widen during off-hours or high-impact news events. 1 standard lot = 100,000 units of base currency; 1 pip on EUR/USD = approximately $10.
Deep Dive: The Lowest-Spread Brokers of 2026
1. IC Markets — The Scalper's Benchmark
IC Markets has been the benchmark ECN broker for raw spread trading since it launched its first raw accounts in 2010. The broker connects directly to a pool of Tier-1 liquidity providers — major banks and non-bank market makers — and passes the best available bid/ask price to clients without adding a mark-up. During the London-New York overlap, when liquidity is deepest, EUR/USD spreads on the Raw Spread MT4/MT5 account genuinely reach 0.0 pips for extended periods, with a weighted daily average of approximately 0.0–0.02 pips.
The commission structure is transparent: $3.50 per side ($7 round turn) on a standard lot. On a trade of $100,000 notional value, that is a total cost of 0.7 basis points, or 0.007% — lower than many institutional trading desks. IC Markets' execution infrastructure is co-located in the Equinix NY4 and LD4 data centres, the same facilities used by major hedge funds, delivering execution speeds averaging under 1 millisecond. ASIC regulation ensures client funds are fully segregated. Volume-based rebate programs are available for traders executing more than $50 million per month, reducing effective costs further. For sheer EUR/USD spread performance, IC Markets remains the peer benchmark.
Read Full IC Markets Review →2. Pepperstone — Marginally Wider, But More Regulation
Pepperstone's Razor account comes within a whisker of IC Markets on total cost, with EUR/USD spreads averaging 0.09 pips during standard session hours. Including the $7 round-turn commission, total cost per standard lot is approximately $7.90 — only $0.90 more per trade than IC Markets' 0.0-pip accounts. For most traders, this difference is negligible against the significant advantage of Pepperstone's dual FCA and ASIC regulation, which provides a higher standard of client protection.
Pepperstone's liquidity network spans 22 global banks and non-bank liquidity providers, delivering consistent pricing across multiple market conditions. The broker's Active Trader programme offers tiered rebates starting from $3 per million dollars traded for clients exceeding $100 million monthly volume. Platform support is exceptionally broad: MT4, MT5, cTrader, and TradingView are all available, each with full ECN integration on the Razor account. For traders who want the lowest possible cost combined with the strongest regulatory safety net, Pepperstone represents the best overall balance.
Read Full Pepperstone Review →3. Exness — Joint-Lowest Cost with Instant Withdrawals
Exness matches IC Markets on raw spread pricing and undercuts virtually the entire market on deposit accessibility and withdrawal speed. The Raw Spread account provides 0.0-pip EUR/USD spreads with a $7 round-turn commission on standard lots — identical total cost to IC Markets — while requiring as little as $200 minimum deposit on the Raw Spread account (or just $1 on the Standard account). The broker processes most withdrawal requests in seconds, 24/7, including weekends — a capability almost no other broker comes close to matching.
Exness achieves its tight spreads through a liquidity network that includes over 20 liquidity providers, giving it consistent pricing depth across major pairs. The broker's trading volume reports are published monthly and transparently — Exness reports monthly trading volumes exceeding $4 trillion, giving it genuine scale advantages in accessing tight interbank quotes. FCA and CySEC regulation cover retail clients in key markets with negative balance protection. MT4 and MT5 are the supported platforms. Exness is particularly strong for traders in emerging markets where fast, fee-free withdrawals to local payment methods represent a major practical advantage.
Read Full Exness Review →4. XM — Zero Spreads With Beginner-Friendly Wrapper
XM's Zero account offers 0.0-pip EUR/USD spreads on up to 30 instruments — matching IC Markets and Exness on headline cost — while packaging this within an educational and support infrastructure far more accessible to developing traders. The $7 round-turn commission applies on Zero accounts, making total cost comparable with the ECN tier above.
XM is one of only a handful of brokers that actively encourages beginners to start on raw spread accounts rather than steering them toward wider-spread standard accounts. The broker's free daily market analysis, live webinars in 20+ languages, and highly responsive multilingual support team make it the most approachable raw-spread broker available. The platform ecosystem is MT4 and MT5 only, which suits the majority of traders. Regulated by ASIC and CySEC with negative balance protection on retail accounts, XM's Zero account is the recommended entry point for serious beginners who want ECN pricing from day one without navigating a complex platform environment.
Read Full XM Review →Spread Myths Debunked
Myth 1: "A 0.0 pip spread means trading is free"
False. A 0.0-pip spread simply means the broker is adding no mark-up to the interbank price. You still pay a fixed commission per lot (typically $7 round turn), which is the broker's revenue. The total cost of a 0.0-pip + $7 commission trade is higher than many beginners expect, but it is significantly lower than a 1.5-pip standard account with no commission at equivalent trade sizes.
Myth 2: "Variable spreads are unpredictable and dangerous"
All raw ECN spreads are variable — they change in real time as liquidity conditions shift. This is not inherently dangerous; it simply reflects the genuine market. Spreads widen during news events and narrow during deep-liquidity hours. A well-informed trader can manage this by avoiding execution immediately around high-impact news (or deliberately trading news with limit orders placed before the release).
Myth 3: "Fixed spreads are always better for beginners"
Fixed spreads sound reassuring but they are consistently wider than variable raw spreads during normal market hours — you pay for the certainty premium. Fixed-spread brokers also tend to use a dealing desk model, creating a conflict of interest. For beginners who want predictable costs, a commission-free standard account at a reputable broker (like eToro or Plus500) is more transparent than a fixed-spread dealing-desk model.
Myth 4: "The spread is the only cost"
Absolutely not. Overnight financing (swap) charges apply when you hold positions past the daily rollover — typically 5pm New York time. These charges vary by pair, direction, and market interest rate differentials, and can be significant for positions held for days or weeks. Inactivity fees, withdrawal fees, and currency conversion charges are additional costs to check before opening an account.
ECN vs Market Maker: What's the Real Difference?
The distinction between ECN and market-maker brokers is fundamental to understanding why spreads differ so dramatically between firms.
An ECN broker connects your orders directly to a pool of competing liquidity providers — banks, hedge funds, and other market participants — and fills your order at the best available price. The broker earns only the commission. There is no dealing desk, which means the broker has no financial incentive for your trades to fail. Raw spreads result from this direct market access model.
A market-maker broker acts as the counterparty to your trades — when you buy, the broker effectively sells to you at a marked-up price. The spread is the broker's primary revenue, and the broker profits most when traders lose. This creates a structural conflict of interest, though reputable regulated market makers hedge their exposure and do not actively manipulate prices. The trade-off is that spreads are consistently wider and execution may be slower.
Many modern brokers operate as hybrid models — acting as market makers for small retail orders while routing larger positions to genuine ECN liquidity. This allows them to offer low minimum deposits without the infrastructure cost of pure ECN connectivity.
When Do Spreads Widen? Key Situations to Know
Even the best raw-spread brokers experience widening spreads in certain conditions. Being aware of these reduces execution surprises:
- High-impact news releases: NFP (US Non-Farm Payrolls), FOMC rate decisions, ECB meetings, and CPI releases can cause spreads to widen by 10x or more in the seconds immediately before and after the announcement. Liquidity providers pull their quotes during these moments to avoid adverse selection.
- Asian session (midnight to 7am London): Reduced liquidity during the Tokyo-only session typically widens EUR/USD spreads to 0.2–0.5 pips even on raw accounts, compared with 0.0 pips during peak London-New York overlap.
- Market open on Mondays: The gap between Friday's close and Sunday's market open (when liquidity resumes on electronic markets) creates spread widening that normalises within the first 30 minutes of trading.
- Market close on Fridays: Liquidity thins as traders square positions ahead of the weekend, with spreads widening in the final hour before the Friday close.
- Public holidays: When major financial centres (London, New York, Tokyo) are closed, liquidity dries up and spreads widen significantly across all pairs.
How to Calculate Your Actual Trading Cost
Understanding your real trading cost requires accounting for the spread, commission, and any applicable overnight financing charges. Here is a worked example:
Example: 1 Standard Lot EUR/USD Trade via IC Markets Raw Spread Account
Comparison: Same Trade via Standard-Spread Broker (1.5 pip spread, no commission)
The difference: $15.00 versus $7.00. For 10 round-turn trades per week, that is a saving of $4,160 per year by using a raw-spread ECN account instead of a standard account. The formula is simple: total cost = (spread in pips × $10 per pip on standard lot) + commission per round turn.
Practical Tips for Spread-Sensitive Traders
- Trade during peak liquidity hours. The London-New York overlap (1pm–5pm London time / 8am–12pm New York time) delivers the tightest spreads consistently. Schedule execution-sensitive trades within this window.
- Avoid trading immediately around news events unless you have a specific news-trading strategy. The spread spikes that occur at news releases can instantly negate any edge.
- Check the commission on the exact account type you open. Many brokers offer both raw-spread commissions accounts and wider-spread zero-commission accounts. The terminology varies — "Razor," "Zero," "ECN," "Raw," "cTrader" — but the principle is the same: check the spread and the commission, then calculate total cost.
- Request a volume discount. If you execute over $10 million per month in notional value, most raw-spread brokers will offer a rebate programme. Contact the broker's institutional desk directly.
- Use limit orders where possible. Unlike market orders, limit orders are filled at your specified price or better — meaning you capture the spread in your favour if the price passes through your level. Market orders always pay the spread.
- Compare total annual cost, not just the headline spread. Factor in withdrawal fees, inactivity fees, and swap rates for the pairs you trade most frequently. A broker with 0.0-pip spreads but $30 wire transfer fees may cost more than one with 0.1-pip spreads and free withdrawals, depending on your withdrawal frequency.
Frequently Asked Questions
IC Markets and Exness both offer EUR/USD spreads averaging 0.0 pips on their raw spread accounts during normal London and New York session hours. XM's Zero account also achieves 0.0 pips on major pairs. These are genuine interbank prices with no broker mark-up added. The total cost including commission is approximately $7 per standard lot for all three brokers.
For traders executing 2 or more standard lots per month, yes — raw spread accounts are almost always cheaper in total. The break-even point is approximately 0.7 lots per month for a broker with $7 round-turn commission versus a 1.0-pip standard account. Below that volume, the commission on raw accounts may make the standard account marginally cheaper in absolute dollar terms, though the ECN execution quality remains superior regardless of volume.
Yes, but the dollar value scales linearly with lot size. A 1.0-pip spread on a micro lot (1,000 units) costs approximately $0.10, compared with $10 on a standard lot (100,000 units). The percentage cost relative to position size is identical regardless of lot size. Commission-based accounts typically charge proportionally less on smaller lots — IC Markets charges $0.035 per 1,000 units — so the relative cost of trading small lots is broadly similar on raw-spread accounts.
Advertised "from" spreads are often minimum figures captured during ideal conditions. Always check the average spread, not the minimum. Reputable brokers like IC Markets, Pepperstone, and Exness publish independently verified historical spread data. For this guide, our team measured live spreads over a 90-day period to verify that published averages match live trading conditions. We recommend doing the same on a demo account before committing real capital.
Brokers that advertise "zero spread, zero commission" models earn revenue elsewhere — typically through wider spreads on less liquid pairs, larger overnight financing charges, or by acting as the direct counterparty to your trades. There is no genuine free lunch in forex execution. When you see a zero-zero claim, investigate the swap rates, the spreads on non-major pairs, and the withdrawal conditions carefully before depositing.
Ready to compare broker conditions side by side? Use our interactive broker comparison tool to filter by spread type, commission, and regulation. For a broader ranking see our Best Forex Brokers 2026 guide.