Commission of $7 a lot, 40 trades a day at 0.5 lot: 28% of a 10% target gone in 20 days

[Fairman]

Commission of $7 a lot, 40 trades a day at 0.5 lot: 28% of a 10% target gone in 20 days

Commission is easy to ignore on a single trade. Over an evaluation it's a large share of the profit target.

Account $100,000. Target 10%, which is $10,000. A scalper takes 40 trades a day at 0.5 lot each, and the commission is $7 per lot round turn. Per trade that's 0.5 x $7 = $3.50, which is 0.7 pips on a EURUSD lot where a pip is $10 (0.5 lot gives $5 per pip).

Per day: 40 x $3.50 = $140.
Over 20 trading days: $2,800.

That's 2.8% of the account, so 28% of the 10% target is spent on commission before you've paid the spread. To net $10,000, the gross profit before commission has to be $12,800. That's 28% more than the target.

Add spread. At 0.6 pips on 0.5 lot, each trade pays $3.00, so 40 trades is $120 a day and $2,400 over 20 days. Total trading costs are $5,200, more than half of the target. The gross needs to be $15,200.

Reducing trades or size by half halves this. If you take 20 trades at 0.5 lot, costs fall to $2,600 and the required gross to $12,600. Whether the strategy produces the same gross with fewer trades is the question, and the answer comes from your own trade list, sorted by how much each trade earned compared to its cost.

[Fairman]

A trade that earns less than its own cost is doing damage. In your trade list, compute for each trade the gross pips and the cost in pips, 0.7 plus the spread. If a group of trades, such as those taken in the last hour of the session, has an average gross of 1.0 pips and a cost of 1.3, then they lose 0.3 pips each before you count anything else. Removing them improves the account directly. This is one of the few places where cutting trades is guaranteed to help, and it's a quick sort in a spreadsheet to find them.

[Fairman]

Commission is paid on winners and losers alike, so the win rate you need goes up. For a 1:1 trade with a 10 pip stop and target and a total cost of 1.3 pips, the break-even win rate is (10 + 1.3) / 20 = 56.5%, not 50%. Scale the stop and target down to 5 pips and it becomes (5 + 1.3) / 10 = 63%. The smaller the trade, the more the fixed cost matters, so the cost per trade in pips should be the first number in any scalping plan for an evaluation.

[Fairman]

Some firms rebate part of the commission, or offer a lower per lot rate on raw spread accounts. For the same 40 trades at 0.5 lot, going from $7 to $5 per lot cuts the daily commission from $140 to $100, and the 20 day total from $2,800 to $2,000, a saving of $800 or 8% of the target. Set that against any extra spread the cheaper account charges. The fair comparison is the all-in cost per lot at your usual spread, using a month of your own volume. Run the same sums with your own account and spreads.

[Fairman]

A related check is the number of lots you trade in total. 40 trades at 0.5 lot is 20 lots a day, 400 lots over 20 days. At $7, that's $2,800, and at $3.50 per lot per side, you're paying that on every one. Some firms or brokers have volume discounts that start at higher monthly lots, and 400 lots in a month may or may not qualify. Total lot volume is the figure to ask about, not the number of trades, since many small trades add up to the same commission as a few large ones.