Scalping: why costs decide the outcome

Two people open the same EUR/USD chart at the same time and see the same price, around 1.0850. One writes down the cost of the trade before entering it. The other looks only at the shape of the candles. After twenty trades of three pips each, their accounts differ by more than any chart pattern could explain.

The first person treats the spread as a fixed charge on every position. On EUR/USD the spread is the gap between the price at which you can buy and the price at which you can sell. If that gap is 1.2 pips, it is paid on entry and again on exit, so it is already inside the result before the market moves at all.

The second person counts the three pips as the gain and forgets the 1.2 pips handed over to enter. That is not a small rounding error. Over twenty trades the gap between the gross figure and the net figure is KSh 26,040, and it is gone before any commission is added. The comparison is not between two techniques. It is between counting the cost and not counting it.

A pip is the smallest standard move most brokers quote on a currency pair. On EUR/USD it is the fourth decimal place, so a move from 1.0850 to 1.0851 is one pip. The value of that pip in shillings depends on the size of the position you open, not on the pair alone.

On a standard lot, one pip on EUR/USD is worth about KSh 1,085. That figure is the one used throughout this page, and it lets every example be checked with a calculator. A mini lot is one tenth of a standard lot, so one pip is about KSh 108.50. A micro lot is one hundredth, so one pip is about KSh 10.85.

The arithmetic for a scalping target follows directly. If you aim for three pips and pay a spread of 1.2 pips, the net move is 3 minus 1.2, which is 1.8 pips. On a standard lot that is 1.8 times KSh 1,085, or KSh 1,953 per trade. Twenty such trades give KSh 39,060 before commission. The same twenty trades counted at the full three pips would look like KSh 65,100, which is the figure the spread removes from view.

The spread is not the only charge. Some brokers add a commission on each trade, either a fixed amount or a fraction of the position size. Others build the cost into a wider spread and charge no separate commission. The two arrangements can produce a similar total, but they do not look the same on a statement.

Swap or financing charges apply when a position is held overnight. A scalper who closes every trade within minutes may avoid them, but a trade left open past the daily cut-off can carry a charge that is larger than the target. Slippage is different again: the price you receive may differ from the price you expected, and on a fast market that difference is a cost you did not choose.

These figures vary between brokers, and they vary between account types at the same broker. There is no single number that applies to everyone. The only reliable method is to read the exact spread, commission and swap terms shown on your own account statement, because those are the numbers that will be subtracted from your results.

Once the costs are known, the decision becomes arithmetic rather than opinion. Take the target in pips, subtract the spread in pips, and multiply by the pip value in shillings. Then subtract the commission on both sides of the trade. What remains is the amount the trade adds or removes before any other charge.

If that remainder is small, no amount of skill in reading the chart will enlarge it. The technique decides how often the target is reached, not how much each reach is worth. A method that wins slightly more often than it loses can still produce a negative total when the cost per trade is large relative to the target.

The comparison at the start of this lesson is the whole point. The person who writes down the spread and the commission first is not being cautious for its own sake. That person is measuring the only part of the result that is fixed before the trade begins. The chart pattern is uncertain. The cost is not.