Mechanics: what “fees” and “spreads” usually mean
In forex, a spread is the difference between the quoted buy price and the quoted sell price for a currency pair. Even if there is no separate commission, the spread is still a cost: if you buy at the ask and later sell at the bid, you have to “work through” that difference.
With a Market Maker model, you should understand the source of the quote: whether your broker is providing its own tradable prices (for example via a dealing desk) and how it determines the spread, or whether it merely relays other liquidity sources. This matters because the “published” spread can be influenced by the provider’s own pricing decisions, while your final realized prices depend on what was tradable at the moment of your order.
Fees are separate scheduled charges that may apply regardless of the spread, such as commissions, financing-related charges, inactivity fees, or other account charges listed in the provider’s pricing documents. These are typically easier to estimate because they are defined as terms, not as moving market data.
Evidence and examples: separating stable terms from variable outcomes
A useful way to verify cost expectations is to split your total estimated trading cost into two parts:
- Published/contractual costs (more stable):
- Commission or explicit fees (if any) and how they are calculated (per trade, per lot, per unit).
- Spread or spread policy as described in documentation.
- Financing/holding costs if the product is charged for holding positions overnight.
- Execution-dependent costs (more variable):
- Spread movement at the time of execution. In fast markets, spreads can widen.
- Price differences between display and fill. If execution is not instantaneous, the fill price may differ.
Example assumption-based illustration (no live prices):
- Assume a pair is quoted with a displayed spread of 1 “unit” (whatever the broker uses to represent the difference).
- Assume you enter at the ask and exit at the bid.
- Then the spread component of your round-trip cost is at least that spread amount, but only if the spread during your entry and exit matches the displayed values.
If spreads widen during entry or exit, your realized cost can exceed the simple “displayed spread × round trips” estimate. That is why you should verify the provider’s definitions: how it presents spreads, whether it mentions conditions (like market hours or volatility) that can change them, and what execution behavior occurs when liquidity is thin.
Limitations and risks: common failure modes to look for
At least one material limitation is that published pricing does not guarantee execution at the displayed prices. Realized costs can change due to:
- Slippage: your order fills at a different price than expected.
- Requotes or execution delays: if your order cannot be filled at the intended quote.
- Liquidity gaps: moments when available prices thin out.
- Spread widening under stress: spreads can move quickly compared with your order timing.
Another limitation is jurisdiction and product variability: cost terms and execution wording can differ by region and instrument. Even when you are looking for general concepts, you should check the specific account/product documentation that applies to your situation.
Verification and next question
To verify what to check, look for four categories in the provider’s official documents:
- Spread definition and spread policy (including how spreads can change).
- Any commission and how it is calculated (if commissions exist).
- Other account charges that apply regardless of the trade (if listed).
- Execution description (how orders are handled when prices move).
Next question to clarify: does the “Market Maker” description you heard correspond to a dealing/markup model with its own quote generation, or to a broker type that may still reference external liquidity? The exact wording in the provider’s documentation is the key independent check.