forex-scalping.com

Spread tilt is the irritation that builds up when every trade starts from a loss. Enter a long, and the position is immediately down by the spread. Enter again, same thing. After twenty trades, the total cost is large and visible.

For a scalper trading 1 or 2 pips, the spread can be a third of the target. Seeing a trade open at minus 0.8 over and over wears down patience.

The reaction can go two ways. Some start looking for entries with a bigger target, avoiding the spread issue but changing the strategy. Others get angry at the broker, and look to switch, even though the cost structure may be about the same elsewhere.

A more productive approach is to treat the spread as a fee, like any business expense, and measure it as a percentage of expected gross profit. If the number is acceptable, the irritation has no basis. If it isn't, then the strategy doesn't fit the account, and no amount of discipline will help.

Seeing the daily cost summarized at the end of the session, in money, makes it real and separates it from the emotional experience of each entry.

Some traders keep a running total of spread cost displayed beside the equity curve. Seeing the figure creep upward in cash terms, instead of as scattered fractions of pips, tends to calm the emotional reaction and clarify the real economics. It's either acceptable or it isn't, and a number settles the question better than annoyance does.

What share of gross profit goes to spread and commissions on your account, and did the number surprise you?

When I finally added it up properly, spread and commission were taking a bit over forty percent of my gross profit, and I was genuinely shocked. I'd been thinking of the cost as a fraction of a pip per trade, which feels like nothing. Seeing it as a monthly figure in money changed the conversation I was having with myself.

Like you say, the reaction could have gone either way. My first instinct was to blame the broker, but after comparing a few others the all in cost was close to the same. The real problem was that I was trading too often for targets that were too small, so the fixed cost ate a huge share of every winner.

I ended up cutting my number of trades by about a third and only trading the busiest part of London, when the spread is tightest. The cost share fell to around a quarter, and the irritation at every entry starting negative more or less went away.