How does a raw spread account work in trading?

@kehinde - 1 month ago - Forex Education

I would appreciate if someone could breakdown how raw spread trading accounts really work and what benefit they have over regular trading accounts. Thanks

@arthur_wildberry - 1 month ago

Raw spread accounts charge you a tighter spread and in return, you must pay a fixed amount of money as commission after each trade.

There was a time I traded 0.05 lot size of EUR/USD on a raw account, and the spread was 0.01 pips. Before closing the trade i was up $5 but after closing the trade i discovered my final profit was $4.82 because a $0.18 commission had been deducted.

@hipkin_mike - 1 month ago

Raw accounts have lower spread costs so that during trading, you can set your stop loss close to your entry without having to worry about being stopped out easily. Although you also pay a commission per trade, you only pay the commission after you close the trade. The disadvantage of raw accounts for some is that you need to calculate the commission in your head as it is not displayed on the system. So, while you are trading you need to have a mental idea of how much commission you will be charged after the trade is closed and you have to factor that into your take profit. If your profit is lower than the commission, you will discover that a trade that seemed to close in a profit will actually be represented as a loss in your account history after commission is removed.

@maasai_princess - 1 month ago

Raw spread accounts have a benefit of transparency since the commission is the major part of the trading fee, while spread is a minor part.

You see with regular trading accounts, the spread is way higher, can be widened during a trade & is not shown in the history or account statement. But with raw spread accounts, the spread is a minor part of the trading fee instead the commission per trade which is the major part of the trading fee, is displayed in the account history and acount statement.

This way. you can calculate how much fees you pay for each trade. Raw accounts are ideal for high volume traders where even the slightest increase in spread could translate to a tangible sum of money.

In the grand scheme of things there may not be a significant cost saving when it comes to raw/standard accounts but the raw account definitely offers more transparency.