Tighter spread or faster execution: the account type trade-off

[Fairman]

Tighter spread or faster execution: the account type trade-off

Account menus often present a choice: tight spreads with variable execution, or wider spreads with fast, guaranteed fills. Many assume tight spread wins by default, since cost per trade looks lower.

For a scalper, the right answer depends on the style. If entries are triggered during fast moves, execution quality dominates, and a few tenths of a pip in spread will not offset a half pip of slippage plus missed trades. If entries happen in calm, range-bound tape, the tight spread truly matters, and execution speed is less critical.

The honest way to decide is testing during the actual trading hours. Run each account type with the same strategy for a couple of weeks at small size. Then compare total cost: spread, commission, slippage, and the profit from trades that failed to fill on the slower account.

That last item is often forgotten. Missed trades on winning setups are a real cost, just invisible in the statement.

Has the cheaper account type ever turned out more expensive in practice?

[Fairman]

Example from my own test. Raw account: 0.1 pip average spread plus 7 dollars commission, which is 0.7 pips, so 0.8 total. Standard account: 1.2 pips spread, no commission. Looks like raw wins by 0.4. But slippage on the raw one was 0.3 on average during my entries and the standard one was 0.05. Still raw is ahead, barely. Without measuring, I'd have thought it was a landslide. The point is that the gap between account types was smaller than the marketing implied. Depending on when I trade, the result could flip. If I traded more around news, I suspect the standard account would win.

[Amanhasnoname]

My experience is that the decision flipped depending on which pair I ran it on, so I'd test each pair separately instead of picking an account type once. On EUR/USD during London, the raw account won by a clear margin for me. On GBP/JPY during the same hours, the standard account was ahead, because the commission-based account showed much wider variation in slippage when the pair moved fast and my entries tend to be momentum-based on that cross.

I also learned to count rejected and requoted orders as a cost. On the faster account type I had almost none, but on the other I had around three out of every hundred entries come back with a new price, and those were mostly the best-looking setups. When I valued a missed winner at its average profit, the fee gap more or less disappeared.

If you try this yourself, run both accounts in parallel on the same signals, rather than one after the other. Otherwise you can't separate the account effect from a change in market conditions.