How significant is the scalping commission on Forex and how to minimize it

I am often asked how important is the size of the scalping commission from a broker when trading on Forex or the stock exchange.

I usually answer that the size of the spread has almost no effect on the outcome of the transaction, because now brokers open positions almost free of charge, with rare exceptions, for some assets.

But after I had to trade using scalping on Forex, my opinion changed dramatically; in this strategy, size still matters.

Until this moment, I only suspected how much a broker earns, but here all the assumptions exceeded any expectations.

Scalping commission size using a specific example

For trading, we chose one of the most liquid currency pairs with a minimum spread and which almost always has a normal trend, well, at least one that is sufficient for our strategy.

As you may have guessed, this is the EURUSD pair. The spread size for the chosen broker ranges on average from 0 to 5 pips at the fifth decimal place, which, you must admit, is quite small.

However, no matter how hard I tried, the average commission size still didn’t drop below 3 points:

I traded with a $100 deposit and a volume of 0.1 standard lot, or €10,000. In this scenario, a 3-point commission equaled $0.30 per trade.

Not much considering the volume of positions opened was 10,000, and not bad considering the $100 deposit.

Over 70 trades were opened during the day, and I managed to earn about $20. The result wasn't impressive, but it was quite good for a $100 deposit.

The most interesting conclusion, however, came after calculating the commission paid to the broker for opening orders. It came to about $21.

In other words, I paid the broker 21% of my initial deposit for opening orders.

And if you analyze the situation as a whole, you can see that an average spread of 6 points, instead of 3, would have resulted in a significant loss. Scalping exotic currencies with a 15-pip spread is completely pointless.

Of course, trading is a highly individual experience, but that's exactly what I achieved.

Therefore, if you decide to scalp, let alone pip, choose a broker with a low spread and the most liquid currency pair at the moment. And don't get carried away with leverage; even trading with 1:100 leverage is quite difficult. Also, remember that 70 trades per day is far from the limit, and the scalping commission increases proportionally with the number of orders.