On the Forex currency market, most traders focus on strategies, indicators, and entry points. Meanwhile, one key factor—trading costs—is often overlooked. One such hidden fee is the markup (mark-up), which directly affects net profit. Let’s break it down with an example.
What is Markup
Markup is the premium that a broker adds to the liquidity provider’s commission. Unlike a standard commission, which is charged separately, markup is invisible but present in every trade as part of the spread. Essentially, it’s the broker’s earnings, so companies that route trades to the interbank market benefit when clients execute a high volume of trades.
When a trader opens a position, they don’t see pure interbank quotes but prices that already include the broker’s profit.
For example, on the interbank market, a currency pair might quote at 1.1000 (Bid) and 1.1001 (Ask), making the real spread 1 pip.
However, the broker might show the client 1.0999 and 1.1002, expanding the spread to 3 pips. The 2-pip difference is the markup the broker adds to generate profit.
When Markup is Used
Markup is most commonly applied by brokers using the market maker model or offering CFD instruments. It sometimes appears in ECN/STP models too, combined with a separate commission. For traders, this means trading isn’t free even without visible deductions.
Impact on Trading
Markup directly affects results by increasing entry costs and shifting the break-even point. To offset the extra pips, the price must move further in the trade’s favor.
This is especially noticeable in active trading. With frequent entries, even a small markup accumulates into a substantial amount over time. In trading strategies with small profit targets, markup can be critical.
