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The Cost Arithmeticwork this out before you trade any scalp

Evidence: ModerateBeginnerScalping · Cost

A scalp targeting six pips on a pair with a one-pip spread and a round-turn commission worth another 0.7 pips is not a six-pip trade. It is a 4.3-pip trade, and the stop has to absorb the same 1.7 pips on the other side.

Run that arithmetic through a realistic hit rate and most published scalping strategies become negative before slippage is even considered. This is not a detail of scalping. On this timeframe it is the whole subject, and it is why the three mechanism pages in this book each carry a spread gate.

The calculation takes ten minutes and it will eliminate more bad strategies than a year of backtesting.

Category
Scalping · Cost
Timeframe
M1 to M15 — the timeframes where cost dominates
Suitable pairs
Whichever ones your account can actually trade cheaply — this is account-specific, not market-specific
Session
Spread varies enormously by hour. Measure yours per hour, not as one number.
Indicators / tools
Your own spread history per hour · your commission schedule · your realised slippage

Valid setup

SC-04 · THE COST ARITHMETIC — ONE SIX-PIP SCALP EURUSD · M1 · the target and the stop drawn gross, and again after spread and commission COST 1.08577 1.08584 1.08591 1.08598 1.08606 1.08613 1.08620 what the spread and commission take off the target and add to the stop GROSS TARGET = 6 pips NET TARGET = 4.3 pips ENTRY GROSS STOP = 6 pips NET STOP = 7.7 pips — the cost is paid on this side too 1 2 3 1.08606 1.08604 1.08600 1.08594 1.08592 ① A 6-pip target and a 6-pip stop — an even bet, apparently ② Net it is 4.3 against 7.7. Not an even bet at all ③ The break-even hit rate just moved from 50% to 64% ④ Require the target to be 4 × the total cost ⑤ Measure spread per hour, not as one average ⑥ Do this before the backtest, not after it

Exact rules

Entry

  • Record your actual spread, per pair, per hour, for a month. Your broker's advertised average is not this number.
  • Convert commission into pips at your usual size and add it. Round-turn, not one way.
  • Net edge per trade = gross target × hit rate − gross stop × (1 − hit rate) − total cost. If that is not comfortably positive, no amount of entry refinement will save it.
  • Require the gross target to be at least four times the total cost. Below that, ordinary variation in the spread changes the sign of the result.

Stop loss

  • The stop pays the cost too. A trade stopped out loses the stop distance plus the spread and commission, which is the part people leave out.
  • That asymmetry means a scalping strategy needs a higher hit rate than the raw risk-reward suggests — and the required rate rises fast as the target shrinks.
  • Risk 0.25%–0.5%. High frequency and thin margins do not combine with large size.

Take profit / exit

  • Compute the break-even hit rate for your target and stop including costs, and compare it to your measured one. Most scalping systems die on this comparison.
  • Re-run the arithmetic whenever the spread regime changes — a broker adjusting spreads by half a pip can turn a working strategy negative.
  • The strategies in this book with the best evidence are also the ones whose gross edge is smallest. That is not a coincidence, and it is why this page exists.

Build The Cost Arithmetic

Reading this page is free and always will be. Taking it is what costs — the complete MQL5 for the rules above, yours to keep, permanently. Five of them cost $10 and they never expire.

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More from Scalping

Microstructure Reversionthe spread's own footprintOrder Flow Imbalancethe book, not the chartThe Liquidity Windowscalp the hours, not the pattern

Trading carries risk and most retail accounts lose money. Nothing on this page is financial advice or a recommendation to trade. The chart is an illustration of the rules on constructed candles — it is not a record of a trade and not a backtest.