Scalping: why costs decide the outcome
Cost per trade in pips and in dollars
A scalp aims at a few pips. The spread is the gap between the price you buy at and the price you sell at. That gap is a cost you pay on entry, before the market moves at all. On AUD/USD it is quoted in pips, so you can subtract it directly from your target.
Commission is charged per trade, not per pip. To compare it with the spread, turn it into pips. Divide the commission in dollars by the value of one pip. At A$15 per pip, a commission of A$7 is about 0.47 pips. So the total cost is the spread plus that figure.
With a 1.2 pip spread, total cost is about 1.67 pips. A three pip target leaves roughly 1.33 pips. On one standard lot that is about A$20 per trade. The full three pips would have been A$45. The difference is the cost, and it is larger than the profit.
This is why scalping is an arithmetic problem first. The smaller the target, the larger the share taken by fixed costs. A target of two pips with the same costs leaves almost nothing. The technique cannot change that subtraction.
Break-even and the cost of being wrong
Every trade starts behind. To break even, price must move in your favour by the spread plus the commission in pips. At a 1.2 pip spread and A$7 commission, that is about 1.67 pips. Until price covers that, the position is losing.
A losing scalp is not just the stop distance. It is the stop distance plus the same entry cost. If your stop is three pips away, the total loss is about 4.67 pips. At A$15 per pip that is about A$70 per losing trade.
Winning and losing trades are not symmetrical. A win of three pips nets about 1.33 pips. A loss of three pips costs about 4.67 pips. One loss needs more than three wins to be undone. That ratio, not the win rate, decides the outcome.
The spread can widen when the market is busy or quiet. The commission can be charged per side or per round turn. Both change the break-even. Check the contract specifications on your platform for the exact figures, because they vary between brokers.
Spread, slippage and the platform read
The spread shown on the platform is the current best bid and ask. It is not fixed. It can widen around news, at the daily rollover, and when liquidity is thin. A scalp entered in those moments pays a larger cost than the quiet-hours figure.
Slippage is the difference between the price you expected and the price you get. It happens on entry and on exit. On a small target, one pip of slippage can remove most of the planned profit. It is not a commission, but it has the same effect.
Swap is a charge or credit for holding a position overnight. A scalp closed the same day avoids it. If a position is held past the daily cut-off, the swap is added to or subtracted from the result. The rate varies by broker and by instrument.
To read the platform, look at the ask, the bid and the spread in pips. Then look at the commission per lot in the contract details. Add them in pips. That total is your cost per trade, and it is the number that decides whether the target is worth taking.
Twenty trades of three pips against a spread of 1.2 pips
| Step | Amount | Note |
|---|---|---|
| Trades per day | 20 | the number of trades in this example |
| Target per trade | 3 pips | the gross move the price must make in your favour |
| Spread per trade | 1.2 pips | the gap between the buy and sell price, quoted by the broker |
| Net pips per trade before commission | 1.8 pips | 3 pips minus 1.2 pips |
| Net pips per day before commission | 36 pips | 20 trades times 1.8 pips |
| Value of one pip on one standard lot | A$15 | 10 US dollars converted at 0.6640 |
| Gross result per day | A$540 | 36 pips times A$15 |
| Commission per trade | A$7 | a typical round-turn commission, but this varies between brokers |
| Commission per day | A$140 | 20 trades times A$7 |
| Net result per day | A$400 | A$540 minus A$140 |
The broker may round the pip value, charge a wider spread at busy times, or add a swap if the position is held overnight. Commission and spread vary between brokers, so check the actual figures on your platform.
Doing it once, step by step
Work through the arithmetic once with real numbers from your own platform, then decide whether the target is large enough to cover the cost.
- 01
Find the pip value
Check the pip value for one standard lot of AUD/USD on your platform. At around 0.6640 it is about A$15, but confirm the exact figure. Write it down, because every later step uses it.
- 02
Read the current spread
Look at the bid and ask on the AUD/USD chart. Subtract the bid from the ask and convert to pips. Note whether the market is quiet or busy, because the spread changes. Use the figure you see now, not a remembered one.
- 03
Convert commission to pips
Find the commission per standard lot in the contract details. Divide it by the pip value from step one. For example, A$7 divided by A$15 is about 0.47 pips. Add this to the spread to get total cost in pips.
- 04
Subtract cost from the target
Take your intended target in pips and subtract the total cost. If the target is three pips and cost is 1.67 pips, the net is 1.33 pips. Multiply the net by the pip value to get the expected result per trade.
- 05
Compare win and loss sizes
Add the same cost to your stop distance to get the true loss per trade. If the stop is three pips, the loss is about 4.67 pips. Compare that with the net win. If the loss is more than twice the win, the arithmetic is against you.
- 06
Check the overnight charge
Look up the swap rate for holding AUD/USD overnight. If you close before the daily cut-off, it does not apply. If you hold, add or subtract it from the result. The rate varies between brokers, so use the one shown on your platform.
The mistake most people make here
The common mistake is to count the full three pips as profit and ignore the spread and commission. In the example above, the spread alone removes 1.2 pips from each trade, leaving only 1.8 pips before commission. After A$7 commission per trade, the net result is A$400, not A$540. Always subtract the spread and commission from your target before deciding whether a trade is worth taking.Check yourself
If the spread were 1.5 pips instead of 1.2, what would the net pips per trade be, and what would the daily gross result be before commission?
Net pips per trade: 3 minus 1.5 = 1.5 pips. Daily net pips: 20 times 1.5 = 30 pips. Daily gross result: 30 pips times A$15 = A$450. After A$140 commission, the net result is A$310.
What is the value of one pip on one standard lot of AUD/USD when the rate is 0.6640?
One pip is 10 US dollars. Converted at 0.6640, that is 10 divided by 0.6640, which is approximately A$15.06. This is often rounded to A$15.
Questions that come up next
How do I work out the cost of a scalp in pips when the commission is in dollars?
Divide the commission by the value of one pip. On AUD/USD at 0.6640, one pip on a standard lot is about A$15. A commission of A$7 is therefore about 0.47 pips. Add that to the spread to get the total cost in pips. For a 1.2 pip spread, the total is about 1.67 pips.
Why does the spread change during the day?
The spread is the gap between the best buy and sell prices. It is not fixed. It widens when few people are trading, such as late at night or around major news. It can also widen at the daily rollover. A scalp taken in those moments pays more than the quiet-hours figure.
What is slippage and how does it affect a scalp?
Slippage is the difference between the price you expected and the price you actually get. It happens when the market moves fast or when there is not enough volume at your price. For a scalp, even a small slip can wipe out the thin profit margin. It is another cost that is not shown in the spread.
Does a higher win rate make scalping profitable?
Not on its own. The size of wins and losses matters more. After costs, a three pip win may net only about 1.33 pips, while a three pip loss costs about 4.67 pips. One loss can need more than three wins to recover. The ratio of average win to average loss decides the outcome.
How can I find the exact spread and commission for my account?
Check the contract specifications on your trading platform. They list the spread, commission and any swap charges. These figures vary between brokers, so the ones on your platform are the only ones that matter. Do not rely on general examples.
What is a swap and when does it apply?
A swap is an overnight financing charge. It is added if you hold a position past the daily rollover. Scalps are usually closed within the day, so swap may not apply. But if a trade is held overnight, the swap becomes an extra cost. Check your platform for the exact swap rates.
The words used on this page
- Spread
- The gap between the price you can buy at and the price you can sell at. It is a cost you pay on entry. On AUD/USD it is quoted in pips.
- Commission
- A fee charged by the broker for each trade. It is separate from the spread. It can be charged per side or per round turn.
- Slippage
- The difference between the price you expected and the price you get. It happens when the market moves quickly. It adds to the cost of a trade.
- Break-even
- The point where price has moved enough to cover the spread and commission. Until then, the trade is losing. For a scalp, break-even is usually a few pips away.
- Standard lot
- A standard lot is 100,000 units of the base currency. On AUD/USD, one pip on a standard lot is about A$15 at 0.6640. This value changes with the exchange rate.
- Swap
- An overnight financing charge. It is applied if you hold a position past the daily rollover. It is an extra cost for positions held overnight.
What to take away
- The spread and commission are costs you pay on every trade, before the market moves.
- To compare them with your target, turn the commission into pips by dividing by the pip value.
- A win and a loss of the same pip size are not equal after costs; a loss costs more.
- Check the actual spread, commission and swap on your platform, because they vary between brokers.