Day trading

The spread is the difference between the price at which you can buy and the price at which you can sell. On EUR/USD it is quoted in pips. A pip is the fourth decimal place, so a move from 1.0850 to 1.0851 is one pip. The spread is the first cost you pay, and you pay it the moment you open a position. If the spread is 1 pip, you start 1 pip behind. The market must move 1 pip in your favour before you are back to where you started.

The size of that cost in naira depends on your position size. One standard lot is 100,000 units of the base currency. For EUR/USD, one pip on one standard lot is 10 units of the quote currency, which is US dollars. To convert that to naira, multiply by the EUR/USD rate. At 1.0850, 10 units is 10 x 1.0850 = ₦10.85. So one pip on one standard lot is about ₦10.85. On 0.10 lots it is ₦1.085, and on 0.50 lots it is ₦5.425, which rounds to ₦5.43.

If your broker charges a commission, that is a separate cost. It is usually a fixed amount per lot per side, so a round turn means you pay it twice. Some brokers include the commission in a wider spread instead. Because brokers differ, the exact figure varies. You must check your own broker's schedule. The point is that the spread and any commission are known before you trade. They do not depend on whether you are right or wrong.

Many beginners choose a position size by thinking about the profit they want. They see a 20 pip move and imagine the gain, so they use 1 lot instead of 0.10. That multiplies both the potential profit and the spread by ten. It also multiplies the loss if the market moves against them. The cost of being wrong is not fixed. It grows with the size you choose. The spread you pay is also ten times larger.

A better approach is to decide first how much you are willing to lose on the trade. That amount is your risk. Then you work out where your exit for a loss will be, in pips. The position size follows from those two numbers. For example, if you are willing to risk ₦1,000 and your stop is 10 pips away, then each pip can cost at most ₦100. At ₦10.85 per pip on one standard lot, that means you can trade about 9.2 lots. But that is a very large size for a small account, so you would use a smaller size and a tighter stop, or accept a smaller risk.

The same logic applies to the spread. If the spread is 1 pip and you trade 0.10 lots, the spread costs ₦1.085. If you trade 1 lot, it costs ₦10.85. That cost is paid whether the trade wins or loses. So the spread is a fixed cost per trade, and it scales with size. You cannot avoid it, but you can keep it small by trading a size that matches your risk.

A day trade is closed inside one session. That means you do not hold the position overnight. Swap is the fee charged for holding a position past the broker's daily cut-off. If you close before that cut-off, no swap is charged. The cut-off time varies by broker, so you must check yours. It is often around the same time each day, but it can shift. Closing a few minutes before the cut-off is safer than closing exactly at it.

The common mistake is to hold past the cut-off to avoid a small loss. You hope the market will turn back in your favour. But by holding, you turn a day trade into an overnight position. That adds swap, and it exposes you to news and price gaps that can happen while you sleep. A small loss can become a large one. The decision to close must be made before you enter, not while the market is moving against you.

Decide your exit before entry. That means setting a target and a stop, and a time by which you will close regardless. If the market has not reached your target by that time, you close at the current price. This keeps the trade inside the session and avoids swap. It also removes the temptation to hold and hope. The cost of the spread and any commission is already paid, so closing on time just limits further risk.