Account types: standard, raw spread, cent
What you learn in 3 minutesThe word 'account type' describes how a broker splits one trade into two separate charges: the spread, which is the gap between the buy price and the sell price, and the commission, which is a flat fee per trade.
One round trip on 0.10 lots of AUD/USD at 0.6640
| Step | Amount | Note |
|---|---|---|
| Position size | 0.10 lots | one tenth of a standard lot, so 10,000 units of AUD |
| Standard account spread | 1.2 pips | the gap quoted by the broker at the time of the trade |
| Standard account spread cost | A$1.20 | 1.2 pips multiplied by A$1 per pip on 0.10 lots |
| Standard account commission | A$0.00 | no separate commission is charged on this account type |
| Raw spread account spread | 0.2 pips | the narrower gap quoted on this account type |
| Raw spread account spread cost | A$0.20 | 0.2 pips multiplied by A$1 per pip on 0.10 lots |
| Raw spread account commission | A$0.70 | a round trip commission set by the broker, quoted per side or per round trip |
| Standard account total | A$1.20 | spread cost plus commission, A$1.20 plus A$0.00 |
| Raw spread account total | A$0.90 | spread cost plus commission, A$0.20 plus A$0.70 |
Brokers vary in how they round the pip value, when they charge the commission, and whether the commission is quoted per side or per round trip, so the totals above differ between brokers and between account types.
The mistake people make here
The common mistake is to compare only the spread and treat a raw spread account as cheaper by definition. The commission is the other half of the same cost, and on a small position it can be the larger half. Before choosing, add the spread cost and the commission for one round trip at the size actually intended, then compare the totals. If the plan is to hold a position for a long time, the commission is paid once while the spread is paid once, so the arithmetic stays the same.Check yourself
On 0.10 lots of AUD/USD, a standard account quotes 1.2 pips and no commission. What is the total cost in A$?
1.2 pips multiplied by A$1 per pip is A$1.20, plus A$0.00 commission, so A$1.20.
On the same 0.10 lots, a raw spread account quotes 0.2 pips and A$0.70 commission. What is the total cost in A$?
0.2 pips multiplied by A$1 per pip is A$0.20, plus A$0.70 commission, so A$0.90.
If the position were 0.20 lots instead, with the same spreads and the same A$0.70 commission, what would the raw spread total be?
The pip value doubles to A$2, so 0.2 pips costs A$0.40, plus A$0.70 commission, giving A$1.10.