Definition: what a raw spread account means
A raw spread account is a forex account setup where the provider’s pricing is presented as a relatively “raw” market spread for execution, and an additional cost such as a commission is charged separately. In many explanations, the goal is transparency: you can think of total trading cost as (spread-based cost) + (commission-based cost), with the exact formula depending on the platform and provider terms.
Because providers define “raw spread” differently, the only reliable way to verify how your costs are calculated is to use the provider’s account specification (fee schedule, commission description, and any details about minimum charges and how they are applied). In this article, no live prices or provider-specific terms are assumed.
Mechanism: how the costs usually add up
Worked examples are easiest when you separate stable mechanics from variable conditions.
Stable mechanics (what the math can assume):
- You enter a position at a stated entry price.
- You close it at a stated exit price.
- The trade size determines the number of “units” on which spread cost and commission apply.
- Total cost is composed of spread-related effects plus commission.
Variable market/provider conditions (what you must assume):
- The spread can change between entry and exit.
- Execution may occur at slightly different prices than the ones you assume.
- Commissions can be per lot, per side (entry and exit), and may include minimums.
When someone says “raw spread account,” a useful mental model is: your P&L from price movement is reduced by execution costs that include commission and spread effects. The exact balance depends on the specific fee rules.
Worked example: a fully numeric scenario (with stated assumptions)
Assume the following for a hypothetical EUR/USD trade:
- Trade direction: long EUR/USD.
- Position size: 1 standard lot.
- Lot size assumption: 100,000 EUR notional.
- Entry mid-price (assumed): 1.10000.
- Spread at entry (assumed): 0.00010 (10 pips). For a long position, assume the “ask” is entry mid + half the spread.
- Exit mid-price (assumed): 1.10020.
- Spread at exit (assumed): 0.00010 again.
- Commission (assumed): $3 per lot per side, so $3 for entry and $3 for exit, total $6.
Step 1: convert assumed prices into execution prices
- Entry ask price (assumed): 1.10000 + 0.00005 = 1.10005.
- Exit bid price (assumed): 1.10020 − 0.00005 = 1.10015.
Step 2: compute price-based P&L
Price change in execution terms: 1.10015 − 1.10005 = 0.00010.
- For EUR/USD, assume pip value is $10 per pip for a standard lot (a common classroom approximation).
- 0.00010 equals 1 pip, so price-based P&L (before costs) ≈ +$10.
Step 3: include commission
Commission total (assumed): $6.
Step 4: estimate net result under these assumptions
Net ≈ +$10 − $6 = +$4.
Limitations and failure modes (what can make the example not match reality)
- Spread and execution mismatch: If the actual entry spread, exit spread, or fill prices differ from assumed values, the price-based P&L changes immediately.
- Slippage and liquidity effects: Even if you assume perfect fills at the stated execution prices, real fills can be worse during fast markets.
- Commission rules can be different: Some providers compute commission per side, per lot, or apply minimum fees; if your fee schedule differs, the net number changes.
- Total cost may dominate small price moves: In the example, the net gain relies on price movement producing about $10 gross. If price movement is smaller, commission alone can erase gains.
- Jurisdiction and platform differences: How “raw spread” is represented and how fees are disclosed can vary by provider and region, so independent verification requires reading the provider’s fee and account documentation.
How to verify what “raw spread” means for your situation
To independently check the relevant facts for a worked example you can reproduce, collect:
- The provider’s fee schedule (commission per side/lot and any minimum charges).
- The way spread is shown (e.g., quoted spread vs. execution spread, and whether it can widen).
- The definition of lot size and pip value assumptions in their platform context.