What happens when you press Buy
This lesson follows one EUR/USD order from the moment you press Buy to the moment you close it, and puts a naira figure on each step.
How an order becomes a position
When you press Buy, your platform sends an instruction to the broker. The instruction is not the trade itself. It is a request to buy a set number of lots of EUR/USD at the next price the broker can offer.
The broker fills the order at a price. That price may differ slightly from the one on your screen. The difference is the slippage. Slippage is not a fee. It is the gap between the price you saw and the price you got.
Once filled, the order becomes an open position. An open position is a live contract. Its value moves with the market. It is not money in your account yet. It is a promise that will be settled when you close it.
The position stays open until you close it. Closing means sending the opposite order. If you bought, you sell the same number of lots. The difference between the two fill prices, plus costs, decides your result.
Where costs attach to the four steps
Step one is pressing Buy. No cost attaches here. The platform may show a spread, but that is not charged at this moment. It is built into the price you will get.
Step two is the fill. The spread is the main cost here. The spread is the gap between the buy price and the sell price. If EUR/USD is quoted at 1.0850 bid and 1.0851 ask, the spread is 1 pip. You buy at the ask and sell at the bid, so you start 1 pip behind.
Step three is holding the position. If you keep it open overnight, a swap may apply. A swap is a small credit or debit based on interest rates. It varies by broker and by day. It is not a fixed fee you can know in advance without checking your platform.
Step four is closing. No new cost attaches here, but the spread is paid again in effect. When you close, you sell at the bid. The bid is lower than the ask by the spread. So the spread cost is realised when you close, not when you open.
What the screen shows and what you keep
The profit or loss shown on your platform is often a gross figure. Gross means before the spread and any swap are subtracted. It is not the amount that will land in your account.
To find your net result, start with the gross figure. Subtract the spread cost. Then check if a swap applies. If you held the position for more than a day, a swap may have been added or taken away. Only then do you have the amount you actually keep or lose.
For example, you open 0.10 lots of EUR/USD at 1.0850 and close at 1.0870. The move is 20 pips. At 0.10 lots, 1 pip is 1 unit. The exchange rate is ₦1,600 per unit. So 20 pips is 20 units, which is ₦32,000 gross. The spread is 1 pip, or ₦1,600. The net result is ₦32,000 minus ₦1,600, which is ₦30,400.
If the move had been against you, the same costs apply. You open at 1.0850 and close at 1.0845. The move is 5 pips against you. The loss is 5 units, which is ₦8,000. Add the spread of ₦1,600. The total cost is ₦9,600.
The broker may round the fill price. It may quote a wider spread at busy times. It may add a commission on some account types. These are not hidden fees. They are disclosed in the broker's terms. You should read them before you trade.
One order, four steps, and what each step costs on 0.10 lots
| Step | Amount | Note |
|---|---|---|
| Step 1: Order sent | ₦0 | Sending an order costs nothing at most brokers. Some charge a small platform or data fee, and it varies between brokers. |
| Step 2: Filled at 1.0850 | Spread cost: 1 pip x 0.10 lots x 10 units per pip x ₦1,600 per unit | One pip on one standard lot is 10 units of the quote currency, so 0.10 lots is 1 unit per pip. At an exchange rate of ₦1,600 to 1 unit, 1 pip costs ₦1,600. |
| Step 2 cost in naira | ₦1,600 | This is the spread, the gap between the buy price and the sell price. It is paid the moment the position opens. |
| Step 3: Position open | ₦0 to hold overnight, or a swap fee if held past the daily cut-off | The swap is a small credit or charge. It varies between brokers and by instrument, so check the contract details. |
| Step 4: Closed at 1.0860 | 10 pips gained x 1 unit per pip x ₦1,600 = ₦16,000 gross | 10 pips is the distance from 1.0850 to 1.0860. The gross figure is before the spread already paid at Step 2. |
| Result after the spread | ₦16,000 - ₦1,600 = ₦14,400 | The spread is subtracted because it was paid when the position opened. |
The broker may round the fill price, quote a slightly wider spread at busy times, or add a commission on some account types. The swap on Step 3 can turn a small gain into a smaller one if the position is held for several days.
Doing it once, step by step
You will follow one EUR/USD order from pressing Buy to closing it, and see what each step costs in naira. Do this once on a demo account before using real money.
- 01
Check the spread before you buy
Open your platform and find the EUR/USD quote. Note the bid and the ask. The difference is the spread. If the spread is 1 pip, that is your first cost. It is already in the price.
- 02
Press Buy and note the fill price
Press Buy for 0.10 lots. The platform will show the fill price. It may be slightly different from the ask you saw. Write down the fill price and the time. This is your entry.
- 03
Watch the position and check for swap
The position now appears as open. If you hold it past the broker's daily cut-off, a swap may be added. Check the swap rate in your platform. It varies by broker and by day.
- 04
Close the position and note the exit price
Press Close or Sell. The platform will show the exit price. Write it down. The difference between entry and exit is the gross move in pips.
- 05
Calculate the gross result in naira
Multiply the pips by the value per pip. At 0.10 lots, 1 pip is 1 unit. Multiply by the exchange rate, for example ₦1,600 per unit. That gives the gross naira figure.
- 06
Subtract the spread and any swap
Take the gross figure and subtract the spread cost in naira. Then subtract or add any swap. The result is your net profit or loss. This is the amount that affects your account balance.
The mistake most people make here
Many beginners treat the profit shown on screen as the money they will receive. The screen often shows the gross figure, before the spread and any swap are taken out. The fix is to subtract the spread cost first, then check whether a swap applies, and only then decide whether the trade is worth opening. If the expected move is smaller than the spread, the trade starts in the red.Check yourself
You open 0.10 lots of EUR/USD at 1.0850 and close at 1.0870. The spread is 1 pip and the exchange rate is ₦1,600 per unit. What is the result after the spread?
The move is 20 pips. At 0.10 lots, 1 pip is 1 unit, so 20 pips is 20 units, which is ₦32,000 gross. The spread costs 1 pip, or ₦1,600. The result after the spread is ₦32,000 - ₦1,600 = ₦30,400.
You open 0.10 lots of EUR/USD at 1.0850 and close at 1.0845. The spread is 1 pip and the exchange rate is ₦1,600 per unit. What is the result after the spread?
The move is 5 pips against you. At 0.10 lots, 1 pip is 1 unit, so the loss is 5 units, which is ₦8,000. Add the spread of ₦1,600. The total cost is ₦8,000 + ₦1,600 = ₦9,600.
Questions that come up next
How much is one pip on 0.10 lots of EUR/USD?
One pip is 0.0001 in the price of EUR/USD. On 0.10 lots, one pip is worth 1 unit of the base currency. At the exchange rate of ₦1,600 per unit, that is ₦1,600. So a 1 pip spread on 0.10 lots costs ₦1,600. Every pip the price moves in your favour adds ₦1,600 before costs, and every pip against you subtracts the same.
Why does my position show a loss straight after I open it?
You buy at the ask price and sell at the bid price. The ask is higher than the bid by the spread. So the moment your order is filled, the price you could sell at is lower than the price you paid. That gap is the spread, and it is not a mistake. It is the cost of entering the trade. The position has to move in your favour by at least the spread before it shows a gross profit.
What is slippage and do I pay it as a fee?
Slippage is the difference between the price you saw on your screen and the price your order was filled at. It happens when the market moves quickly, often around news or at busy times. Slippage is not a fee charged by the broker. It is simply the price you got. It can work in your favour or against you. You cannot know it in advance.
When is the spread actually taken from my account?
The spread is built into the price from the moment you open, but it is realised when you close. You buy at the ask and sell at the bid. The bid is lower than the ask by the spread. So when you close, you sell at the lower price, and the difference is effectively paid. The platform may show the spread cost as part of your running loss before you close.
Do I pay a swap on every trade?
No. A swap applies only if you hold the position overnight, past the broker's daily cut-off time. If you open and close within the same day, no swap is charged. If you hold for several days, a swap is added or subtracted each day. The amount depends on interest rates and varies between brokers. Check your platform for the current swap rate before holding overnight.
How do I work out my net result after costs?
Start with the gross profit or loss shown on the platform. Subtract the spread cost in naira. Then check whether a swap was applied for any night you held the position. Add or subtract that swap amount. The figure you are left with is your net result. That is the amount you actually keep or lose. The screen often shows the gross figure first.
The words used on this page
- lot
- A lot is a standard unit of trade size. On EUR/USD, 1 standard lot is 100,000 units of the base currency. A mini lot is 10,000 units, and a micro lot is 1,000 units. Your profit or loss per pip depends on how many lots you trade.
- pip
- A pip is the smallest common price move in a currency pair. For EUR/USD, one pip is 0.0001. If the price moves from 1.0850 to 1.0851, that is one pip. The value of one pip in naira depends on your lot size and the exchange rate.
- spread
- The spread is the gap between the buy price and the sell price. You buy at the higher price, called the ask, and sell at the lower price, called the bid. The spread is a cost you pay on every trade. It is wider when the market is busy or volatile.
- swap
- A swap is a small credit or debit applied when you hold a position overnight. It is based on the interest rate difference between the two currencies in the pair. It varies by broker and by day. It is not a fixed fee and can change without notice.
- slippage
- Slippage is the difference between the price you expected and the price you actually got. It happens when the market moves between the moment you press Buy and the moment your order is filled. It is not a fee. It can be positive or negative.
- open position
- An open position is a live trade that has been filled but not yet closed. Its value moves with the market. It is not money in your account. It becomes a realised profit or loss only when you close it.
What to take away
- Pressing Buy sends an instruction, not money. The fill price, the spread, any swap, and the closing price decide your result.
- The spread is paid in effect when you close, because you sell at the bid and buy at the ask. On 0.10 lots, a 1 pip spread is ₦1,600.
- The profit shown on screen is usually gross. Subtract the spread cost, then check for a swap, to find what you actually keep.
- Slippage and wider spreads at busy times can change the price you get. A swap can turn a small gain into a smaller one if you hold overnight.