Spread cost calculator
The spread is a cost you pay on every single trade. Small numbers multiplied by frequency stop being small.
What the number means
Every trade crosses the spread once. The cost of one crossing is the spread in pips multiplied by the pip value of your position, and it is paid whether the trade wins or loses.
Frequency is the multiplier that matters. A spread that looks negligible per trade compounds into a fixed monthly outgoing that your strategy has to out-earn before it makes anything at all. Comparing two brokers on this number, across your actual trade count, is more honest than comparing quoted spreads.
Worked example
A 0.8 pip spread on EURUSD, trading 2 lots, 40 times a month, with a US dollar account.
- Pip value: $10 per lot, so one crossing costs 0.8 × $10 × 2 = $16.00
- Per month: $16 × 40 = $640.00
- Per year: $7,680.00
That is the toll for crossing the road eighty lots' worth a month, before a single pip of profit or loss. The unit test suite pins these exact figures.
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<iframe src="https://ticksprout.com/tools/spread-cost?pair=EURUSD&spread=0.8&lots=2&trades=40¤cy=USD&rate=1&embed=1" width="100%" height="700" style="border:0" title="Spread cost calculator" loading="lazy"></iframe>
<a href="https://ticksprout.com/tools/spread-cost">Spread cost calculator by Tick Sprout</a>Related tools
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