Scalping: why costs decide the outcome
What you learn in 3 minutesThis lesson shows what a scalping day costs in naira before any profit or loss is counted. At a few pips per trade, the spread and commission are most of the result. You will work out the arithmetic for twenty trades of three pips each against a spread of 1.2 pips.
Twenty trades of 3 pips against a 1.2 pip spread
| Step | Amount | Note |
|---|---|---|
| Target per trade | 3 pips | The move the scalper aims to capture. |
| Spread per trade | 1.2 pips | The gap between buy and sell price, charged on entry and exit. |
| Net per trade before commission | 1.8 pips | 3 pips minus 1.2 pips. |
| Net over 20 trades | 36 pips | 1.8 pips multiplied by 20. |
| Value of one pip on one standard lot | ₦16,000 | 10 units of the quote currency converted at an assumed rate of ₦1,600 per unit. This rate varies. |
| Gross result over 20 trades | ₦576,000 | 36 pips multiplied by ₦16,000 per pip. |
| Commission, if charged | varies by broker | Some brokers charge a separate commission per lot. It is not included above. |
| Result if the spread were 2 pips | ₦320,000 | 3 minus 2 equals 1 pip, multiplied by 20 trades, then by ₦16,000. |
The broker may round the spread, widen it around news, charge commission on top, or quote a different exchange rate for the conversion. Any of these changes the final naira figure.
The mistake people make here
The common mistake is to count the 3 pip target as the result and ignore the spread. A 1.2 pip spread takes 40 per cent of a 3 pip target before anything else. If the spread widens to 2 pips, only 1 pip remains, and the same twenty trades earn far less. Check the spread and any commission before you count the target, and treat the net figure as the only one that matters.Check yourself
If the spread is 1.2 pips and you aim for 3 pips, what is the net per trade before commission?
3 minus 1.2 equals 1.8 pips.
Over 20 trades at 1.8 pips net, how many pips remain?
1.8 multiplied by 20 equals 36 pips.
At ₦16,000 per pip on one standard lot, what is ₦ for 36 pips?
36 multiplied by ₦16,000 equals ₦576,000.
If the spread rises to 2 pips, what is the result over 20 trades?
3 minus 2 equals 1 pip, multiplied by 20 equals 20 pips, multiplied by ₦16,000 equals ₦320,000.