What is raw spread?
“Raw spread” is the bid–ask spread you see quoted on a trading platform, described as the market’s difference between the buy price (ask) and sell price (bid), before any other account charges like commission are added.
Because providers define and display costs differently, the only safe way to use the term is to treat “raw spread” as a label for the quoted bid–ask component and then explicitly list any additional charges that your account may apply.
How does a worked example of raw spread work?
A worked example is a scenario where you convert the quoted spread into money terms. To do that, you need stable inputs (assumptions) and you must clearly separate them from variable conditions (which you cannot assume in advance).
Here are the mechanics in plain terms:
- Pick a currency pair (the pair affects pip size and pip value).
- Choose a position size (lots or units) so you can translate pips into account currency.
- Choose a spread in pips (this is the “raw” bid–ask difference).
- Add any explicit commission per side (if the account charges it).
- State what you assume about execution: ideal fills at the quoted bid/ask, with no slippage.
Worked numeric scenario (all assumptions stated)
Assume the following purely for demonstration:
- Instrument: a typical forex pair where “1 pip” corresponds to 0.0001 price movement.
- Position size: 1.00 lot, and assume 1 pip = $10 in account currency (this is a simplifying assumption; pip value can differ by pair and account).
- Raw spread (quoted bid–ask difference): 1.6 pips.
- Commission: $3.00 per side (buy side and sell side both charged), so $6.00 round-turn.
- Trade direction: you open and later close the position, so you will cross the spread twice (once when entering, once when exiting).
- Execution: you fill exactly at the quoted bid for the sell and at the quoted ask for the buy, with zero slippage.
Now compute:
- Spread cost per side (in dollars) = 1.6 pips × $10/pip = $16.00.
- Spread cost round-turn = $16.00 × 2 = $32.00.
- Add commission round-turn = $6.00.
- Total dealing cost assumption = $32.00 + $6.00 = $38.00.
Important: this $38.00 is not a prediction of profit or loss. It is only the cost estimate under the stated assumptions.
Limitations and risks of raw spread calculations
Even if “raw spread” is clearly defined, a worked example can still fail as a real-world estimate because several variables can change.
Material limitation: execution and slippage
The scenario assumed fills at the quoted bid/ask and zero slippage. In practice, fast markets, liquidity changes, or order handling can cause you to get a worse effective price than the displayed quote.
Material limitation: what “raw” excludes
Some accounts may display a bid–ask component as “raw,” while other costs (commission, financing/rollover, fees, or spread adjustments) may not be included in that number. If you forget to add commission, you understate cost; if you add a fee that is already included in the display, you overstate it.
Material limitation: pip value and contract specifics
The $10 per pip assumption is a shortcut. Pip value depends on contract specifications and account currency. If your account uses different contract sizing or conversion rules, the dollar impact of the same pip spread will differ.
Verification and next question to check
To independently verify whether your “raw spread” quote matches the mechanics you used, confirm in the account documentation:
- The exact definition of the displayed “raw spread” (does it exclude commission?).
- The commission schedule (per side, per round-turn, or per unit), if applicable.
- The contract size and pip value calculation for your chosen pair.
If you want, share the pair, lot size, and the exact “raw spread” and fee definitions from your account terms (without live prices). I can then restate the worked example with your specific assumptions and highlight which inputs are variable versus fixed.