Add the layers before you enter
Most traders measure the spread alone because it is the number on screen. The real cost has four layers, three of which appear only after execution: the spread on entry, commission where it applies, slippage on entry and possibly exit, and swap for every night held.
The right measure is not their sum in dollars but their share of your risk. That ratio decides whether a small-target strategy is viable at all — see expectancy.
Cost measured against risk
Execution quality is not a technical detail but a cost line measured in dollars. The same reference account the cost family uses: 0.10 lots of gold at 2,400, where $1 of price is $10 of money, and 1% of a $1,000 account is $10.
On that scale every execution cost is directly comparable with the spread, slippage and swap already published — and the only question that matters is how much of the risk budget it consumes before price moves at all.
The formula
Execution cost = spread + commission + slippage + (swap × nights held)
A worked example
On 0.10 lots of gold: a 30-cent spread is $3, 20 cents of slippage is $2, and swap at $1.50 for three nights is $4.50. Total $9.50.
Against 1% risk on a $1,000 account — $10 — that is 95% of the risk budget before price has moved at all. The trade must make roughly 1R simply to break even, which is why many strategies that look sound on paper fail in practice.
Common mistakes with this term
- Comparing brokers by spread alone, when commission and swap can reverse the comparison entirely.
- Measuring cost in dollars rather than as a share of risk, so it looks small while consuming the trade.