Scalping: why costs decide the outcome
What you learn in 3 minutesA reader asked: if I take 20 trades a day and each one only makes 3 pips, why does my account not grow? This lesson answers with arithmetic, not opinion. On USD/ZAR at about 18.4100, a pip is 0.0001, so one pip on a standard lot is roughly R10.00. If your spread is 1.2 pips, you start every trade 1.2 pips behind. That cost is charged whether you win or lose.
20 trades at 3 pips each, with a 1.2-pip spread
| Step | Amount | Note |
|---|---|---|
| Gross pips per trade | 3.0 pips | The move you aim to capture. |
| Spread cost per trade | 1.2 pips | Quoted by the broker; varies between brokers. |
| Net pips per trade | 1.8 pips | 3.0 minus 1.2. |
| Trades per day | 20 | The reader's stated number. |
| Net pips per day | 36 pips | 1.8 multiplied by 20. |
| Value of one pip on one standard lot | R10.00 | On USD/ZAR near 18.4100, 0.0001 of one lot is about R10.00. |
| Gross daily result before commission | R360.00 | 36 pips multiplied by R10.00. |
| Commission, if charged | R0.00 in this example | Many brokers charge per lot per side; the amount varies, so it is left at zero here. |
Your broker may round the spread, widen it around news, charge commission per lot per side, or apply a swap if you hold overnight. Those amounts vary between brokers and are not included above.
The mistake people make here
The common mistake is counting the 3 pips as profit and ignoring the 1.2 pips already gone. At 3 pips gross, the spread is 40 per cent of the move, so a small widening of the spread turns a winning trade into a losing one. Instead, write down the spread before you enter and subtract it from your target. If the net number is not worth the risk, skip the trade. Also check whether your broker charges commission on top, because that changes the break-even point.Check yourself
If the spread were 1.8 pips instead of 1.2, what would 20 trades at 3 pips gross leave?
Net per trade is 3.0 minus 1.8 = 1.2 pips. Over 20 trades that is 24 pips. At R10.00 per pip on one standard lot, that is R240.00 before any commission.
How many pips does one trade need to cover a 1.2-pip spread and still net 3 pips?
It needs 1.2 plus 3.0 = 4.2 pips gross. Anything less than 4.2 pips gross leaves under 3 pips net.