Formula
| Item | Expression |
|---|---|
| Value of 1 pip (yen) | Yen cross: 1,000 yen × lots / USD pairs: 10 USD × USD/JPY × lots |
| Spread cost | Spread (pips) × value of 1 pip |
| Effective cost | Spread cost + commission − cashback |
The effective spread is the effective cost divided by the value of 1 pip.
Why look at the spread in yen
Spreads are normally quoted in pips, but the cost you actually pay changes with your trading volume. If the USD/JPY spread is 1.2 pips on 1 lot (100,000 units), that is a cost of 1,200 yen per trade.
Commission accounts (ECN, Zero and similar) have narrower spreads but charge a round-turn commission. Converting both to yen and adding them lets you compare account types fairly.
The effective spread after deducting cashback
Cashback returns part of your trading costs, so the amount left after subtracting it from spread plus commission is your true cost. For example, if the cost is 1,200 yen and the payout is 750 yen (5 USD), the effective cost is 450 yen, equivalent to 0.45 pips.
- Even on an account with a wider spread, a larger payout can reverse the order of effective costs
- The more often you trade, as in scalping, the more a 1-pip difference adds up over a month
- The definition of a pip differs by instrument, such as gold, so check your broker's instrument specifications
Points to note
Spreads fluctuate with the time of day and economic releases. Enter the official average or a value you have measured on your own account. Confirmed cashback values will be published on each broker page at launch.