Spread and commissions: the costs that eat your profits
The spread is the difference between the buy and sell price of an asset, and it's one of the main costs of trading. Together with commissions, it forms the "friction" that separates your theoretical result from the real one. Many novice traders ignore them, and those cents repeated a thousand times become a huge hole.
What the spread is, with an example
When you look at a price, there are actually two: one you can buy at (higher) and one you can sell at (lower). That difference is the spread, and the broker keeps it. If EUR/USD has a 1 pip spread, the moment you open the trade you're already 1 pip "in the red": you need price to move in your favour just to break even. It's not a separate commission, it's built into the price.
Commissions: the other cost
Some brokers charge a tight spread but add a fixed commission per trade. Others charge no commission but widen the spread. There's no free lunch: if a broker says "no commissions", the cost is in the spread. What matters is adding both to know your real cost per trade.
Why it matters far more than it seems
A cost of 2 pips per trade seems tiny. But if you make 5 trades a day, that's 10 pips daily in costs. In a 20-day trading month, 200 pips out of your pocket just in friction, whether you win or lose. For a frequent trader, costs can be the difference between being profitable or not. The more you trade, the more every tenth of a pip matters.
The typical mistake: choosing a broker only by the advertised spread
Brokers advertise their minimum spread ("from 0.0 pips"), but that number is for the best moment, not the usual one. In big news or low liquidity, the spread spikes. Look at the real average spread in your trading hours, not the headline. And be wary of "impossibly low" spreads: the cost is somewhere else.
Where to start
Calculate your real cost per trade (spread + commission) and multiply it by your number of trades per month. That number, seen together, is usually revealing. If you trade a lot, reducing costs is one of the most direct and safe ways to improve your returns, without risking a single extra euro.