Forex markup is the hidden spread widening that brokers add to interbank quotes, increasing trading costs by 1-2 pips or more per trade. This markup forms part of the bid-ask spread, directly reducing your profitability especially in high-frequency strategies.
What Is Markup in Forex
Markup is the premium a broker adds to the liquidity provider’s commission. Unlike separate commissions, markup is embedded invisibly in every trade as part of the spread. It represents the broker’s profit, making it advantageous for them when clients trade frequently.
When opening a position, traders see broker-adjusted prices rather than raw interbank quotes that already include the broker’s margin.
For example, interbank quotes for a currency pair might be 1.1000 (Bid) and 1.1001 (Ask), a 1-pip spread. The broker could display 1.0999 and 1.1002 to the client, expanding the spread to 3 pips. The 2-pip difference is the markup, securing the broker’s earnings.
When Brokers Use Markup
Markup appears most in market maker models or CFD trading. It can also occur in ECN/STP accounts alongside commissions. This means trading incurs costs even without explicit deductions.
Impact on Trading Results
Markup raises entry costs and shifts breakeven points, requiring prices to move further in your favor. In scalping or strategies with small profit targets, even minor markups accumulate into major losses over time. High-volume trading amplifies this effect significantly.
FAQ
What is the difference between markup and commission?
Markup hides in the spread as extra pips; commissions are separate fixed fees per trade or lot.
How do I spot high markup brokers?
Compare broker spreads to interbank rates during low volatility; wider gaps indicate higher markup.
Does markup apply to all account types?
Common in market maker accounts; ECN/STP may use raw spreads plus commissions instead.
