Counting commission against the profit target on a challenge

[Fairman]

Counting commission against the profit target on a challenge

Most people plan a challenge around the profit target and the drawdown limits. Fewer work out how much of the target goes to commission before they even start.

For a swing trader taking a handful of trades, commission is a rounding error. For a scalper taking several trades a day with tight targets, it isn't. Every round turn costs a fixed amount per lot, and that cost comes out of the same balance the target is measured on.

A rough way to estimate it before buying: take your usual number of trades per day, your usual lot size on that account, and the firm's commission per round turn. Multiply them and then multiply by the number of days you expect the challenge to take. Compare that number with the profit target.

If commission works out to a meaningful share of the target, the strategy needs a higher average gross result per trade to pass, or fewer trades, or a firm with cheaper costs. Better to know that at the planning stage than to discover halfway through that the account is barely moving despite a decent win rate.

Spread costs come on top of this, and some firms run wider spreads than retail raw accounts to make up for lower commission, so compare the total cost, not just one line of it.

[Fairman]

The commission figure on a firm's website is sometimes per side rather than per round turn, and the wording isn't always clear. A firm listing a small number per lot might charge it twice, once on entry and once on exit. Checking a single trade's cost in the account history on a free trial removes the guesswork. Open and close one small position, then look at what was actually deducted. That number, scaled up to your normal size, is the real cost per trade to plan with, and it's often different from what the comparison sites list.

[Fairman]

Gold and indices have their own commission structures at many firms, sometimes zero commission with a wider spread, sometimes a fixed fee per contract. A scalper who mixes FX and gold on one challenge needs to work out the cost for each separately. The cheaper symbol per trade isn't always the obvious one. A pair with a tight spread but high commission can end up costing more per scalp than a symbol with a wider spread and no commission, depending on how far your targets are and how many times a day you trade it. Write the per trade cost for each symbol at the top of the sizing sheet, so it sits right next to the stop and target when you plan a trade and you can see at a glance whether the scalp clears its costs.

[Fairman]

Trade frequency is the lever most scalpers can actually control. Cutting the weakest setups, the ones taken out of boredom or at marginal levels, reduces commission directly while often improving the win rate as well. A journal that shows results net of commission per setup type makes it obvious which ones aren't paying for their own costs. Those are the first to drop. On a challenge with a fixed target, fewer and better trades usually get there faster than lots of small ones that each give back a slice to costs.

[FXS London Scalper]

Commission against the target is easy to underestimate. A quick calculation helps: average trades per day, times days in the challenge, times commission per round turn at typical size. For an active London scalper it can easily be a meaningful share of a 10 percent target. Some prop firms also apply commission on top of a raw spread that is wider than at a retail broker. Checking the actual spread on the firm's feed at the London open gives a better estimate of total costs.

[Fairman]

Daily loss limits count commission too, at most firms. A day with several small losing scalps can approach the limit faster than the raw losses suggest, because each trade also paid its commission. Including commission in your own running total for the day, rather than only watching closed losses, keeps the number you're tracking the same as the one the firm is tracking. That avoids the unpleasant surprise of a breach notice on a day where the losses on their own looked comfortably inside the limit and the costs pushed the account over. Some firms also apply swap to the same daily figure, which matters on the odd trade held past rollover.

[Shadow Trader]

The profit column in the history can be misleading. On many platforms, the profit shown for a trade excludes commission and swap, which appear in separate columns. A trade showing +0.6 pips of profit may have paid commission that turns it into a loss.

A quick scan of the history looks green. The balance tells a different story.

For scalpers on commission-based accounts, the net result per trade is what counts. A column that adds profit, commission, and swap is a basic need, and some platforms don't provide it by default.

Another subtle effect: a trade that's closed at breakeven in price terms is a loss after commission. A scratch trade costs the commission twice, once on entry and once on exit.

The number of scratches in the log matters, then. Dozens of "free" breakeven exits per week each cost a few cents or dollars. They look neutral on the chart.

A spreadsheet that totals net profit per trade, and a count of how many were scratches, may show that a large part of the monthly cost comes from trades that "didn't lose".

Did seeing net-of-commission numbers change the opinion of a strategy that looked profitable?