Why a one pip spread can be cheap on one pair and expensive on another

[Shadow Trader]

Two pairs are open on the screen. Both show a spread of about 1.0 pip. One has been moving roughly 6 pips in the average five-minute window. The other is moving 3 pips. Same quoted cost, but the second pair is paying twice as much of its movement to get in and out.

That is the spread-to-range ratio. The spread divided by the typical movement over the holding time gives a rough share of the move eaten by cost. Spread 1 on a 6 pip window is about 17 percent. Spread 1 on a 3 pip window is about 33 percent. A strategy with a modest edge can survive the first and not the second.

The ratio changes through the day. A pair that looks fine at the London open can turn expensive in the late Asian session, when range shrinks while spread widens. So a pair is not good or bad on its own, it is good or bad at certain hours.

For the calculation, ATR on the timeframe closest to the holding time works as a rough range, or the average candle range over the last few hours. A simple spreadsheet with spread at entry and average range per hour is enough to rank pairs.

Commission accounts need the commission converted into pips and added to the spread, otherwise the ratio flatters them.

What spread-to-range ratio does anyone treat as the upper limit before a pair gets skipped, and does it differ by session?