The spread is part of the stop distance
Posted: Sat Oct 31, 2026 7:21 am
A 4 pip stop on a long position, placed relative to the chart price, effectively has a 4 pip distance from the bid at entry. But entry was at the ask, so the real risk is the stop distance plus the spread.
With a 1 pip spread, the actual risk is 5 pips from the fill price, not 4. For a trade with a 4 pip target, the effective reward is 3 pips against a 5 pip risk.
That changes the arithmetic. The reward-to-risk ratio drops from 1:1 to 0.6:1, so the required win rate climbs significantly.
Calculating risk and reward net of the spread gives a more honest view. Position size should be based on the real distance, including spread, to keep risk per trade on target.
Spread variation adds noise. During wide spread moments, the real distance increases, and a fixed lot size risks more than intended.
Scaling lot size dynamically by current spread keeps risk consistent, and some traders build that into their sizing rules.
Does the spread get included when calculating stop distance and position size?
With a 1 pip spread, the actual risk is 5 pips from the fill price, not 4. For a trade with a 4 pip target, the effective reward is 3 pips against a 5 pip risk.
That changes the arithmetic. The reward-to-risk ratio drops from 1:1 to 0.6:1, so the required win rate climbs significantly.
Calculating risk and reward net of the spread gives a more honest view. Position size should be based on the real distance, including spread, to keep risk per trade on target.
Spread variation adds noise. During wide spread moments, the real distance increases, and a fixed lot size risks more than intended.
Scaling lot size dynamically by current spread keeps risk consistent, and some traders build that into their sizing rules.
Does the spread get included when calculating stop distance and position size?