What happens when you press Buy

Two readers open the same EUR/USD order on the same morning. The first writes down the pip value in shillings, the spread on the platform, and any commission or overnight charge before clicking. The second clicks first and checks the statement later. Both orders leave the platform, both get filled, both become open positions, and both end when closed. The difference is not luck. It is whether each cost was attached to a step before the money moved.

The first reader knows that a cost can attach to step one, step two, step three, or step four. Step one is the order leaving the platform. Step two is the fill price. Step three is the open position. Step four is the close. A spread is charged at step two, because the buy price and sell price differ. Commission and overnight charges are charged at step three, because the position is open. The first reader can say which step produced which shilling figure.

The second reader sees only one number at the end, the profit or loss. That number is the sum of several separate costs, and it cannot be split back into them after the fact. If the fill price was worse than expected, the second reader may think the trading decision was poor. It was not the decision. It was step two. Working out the costs in advance turns a single confusing figure into four separate, checkable ones.

One standard lot of EUR/USD is 100,000 units. One pip is 0.0001 of the quote currency. Multiply 100,000 by 0.0001 and you get 10 units of the quote currency per pip on one standard lot. The quote currency here is the second currency in the pair. For EUR/USD that is the US dollar, so the raw pip value is 10 dollars on one standard lot. That figure is not yet in shillings.

To convert to shillings, use the exchange rate between the shilling and the quote currency. At an EUR/USD price of 1.0850, the conversion gives about KSh 10.85 per pip on one standard lot. This number changes when the exchange rate changes, so treat it as an example, not a fixed rate. Your broker may round it differently. The rounding rule varies between brokers, so check your own account.

If you trade 0.10 lots instead of one standard lot, the pip value is one tenth of the standard figure. On 0.10 lots, one pip is about KSh 1.085. Twenty pips on 0.10 lots is 20 times that, which is about KSh 21.70. Compare that with the example on the page, where 0.10 lots and 20 pips gave KSh 2,170. The difference shows why the lot size must be fixed before the calculation, not after.

When you press Buy, the platform sends an order to your broker. The broker returns a fill price. That price may be the one shown on the screen, or it may be different. The difference is not a fee in the usual sense, but it is a real cost, and it belongs to step two. It is separate from the spread. The spread is the gap between the buy price and the sell price at the moment you look. The fill price is the price you actually get.

Suppose the platform shows a buy price of 1.0852 and a sell price of 1.0850. The spread is 0.0002, which is 2 pips. On 0.10 lots, 2 pips times about KSh 1.085 per pip gives about KSh 2.17. That is the spread cost at step two. If your fill price is 1.0853 instead of 1.0852, you paid one extra pip at step two, which is about KSh 1.085 on 0.10 lots. Write both numbers down. They are different costs from the same step.

Commission and overnight charges attach to step three, the open position. A commission is charged when the position is opened, or when it is closed, depending on the broker. An overnight charge is added if you hold the position past a certain time. Both vary between brokers. Neither is part of the spread. If you close the position at step four, the final figure is the gross profit or loss, minus the spread, minus any commission, minus any overnight charge. Each one can be traced to a step.