[00:00] Picture this. You open up a trade. It's a one lot size position. The account that you have has zero commissions and only a one pip spread. Once you close that trade in profit, you see your money,
[00:12] and yet you see zero commissions. The only issue is that trade costs you $10. You probably never saw a $10 charge. There was no commission deducted from your account. There wasn't even a little notification saying, thanks, we'll take 10 bucks now, but you paid it. And if you are trading 10
[00:26] lots per position, that's $100 per trade. Every single trade. And here's the crazy part. The broker charging you a $7 commission per lot can actually be cheaper than the broker advertising
[00:38] zero commissions. I know that sounds ass backwards, but hear me out. In this video, we're going to do something that traders actually hate doing, and that's math. I'm going to show you exactly where your money is going every time you click the buy and sell button. Let's use the most popular
[00:51] Forex currency pair on planet Earth, Euro USD, because the math is incredibly easy. On Euro USD, one standard lot has a pip value of approximately $10. So a one lot trade moves one pip, that's $10.
[01:07] If your broker has a one pip spread, you're effectively starting the trade approximately $10 in the hole every single time you enter a trade. Now, obviously spreads change. Sometimes they're 0.8 pips. Sometimes they're 1.2 pips. During news, they can absolutely
[01:25] explode. I've seen it get to like 15 pips. So for this example, we're going to keep it stupidly simple and use a consistent 1 pip spread. Here's what that costs. Now at 0 lots who cares The cost of the trade is a dollar But look what happens when you start scaling your account or trading more capital Five lots Ten lots And remember
[01:50] you didn't necessarily see a $100 fee tacked onto that trade. It's hidden inside the difference between the bid and the ask price. Now, here's why I started paying attention to this. Let's say I
[02:02] have a strategy with a relatively small take profit like I'm currently working on. Maybe I'm trying to capture eight pips. At one lot, an eight pip move is $80. That's pretty good profit, but if
[02:14] I'm losing one pip to the spread, that's $10. So before we even start talking about whether my strategy is profitable, 12.5% of that entire eight pip move is being consumed by the spread.
[02:27] At 5 lots, I might think 8 pips times $50 is $400 in profit, but that 1 pip spread represents $50. Now I'm talking about roughly $350 in profit after the cost of spreads.
[02:42] Same strategy, same entry, same exit, completely different economics. And this is why scalpers especially need to understand trading costs. If you're trying to catch 50 pips or 100 pips, 1 pip is not enormous.
[02:56] But if you're trying to capture four pips or five pips or eight pips, it's huge. And this is where the marketing tactics or promotional information from all brokers can screw with your head.
[03:08] You see zero commissions and naturally you think, perfect, all of my trading is free. No, you have to look at the total transaction cost. Let compare our one pip spread against a hypothetical broker charging you per lot Now as you can see right here we have a 0 lot a 0 lot 1 lot 5 lots and 10 lots Now with a standard
[03:32] one pip spread, you can see the amount that that trade is costing you. We have $1, $5, $10, $50, and $100. Now, if you have a broker that gives you zero spreads but charges you a $3 commission
[03:45] per trade, the 0.1 lot is 30 cents. The 0.5 is $1.50. One lot is $3, five lots is $15, and 10 lots is $30. I don't know about you, but that's substantially cheaper than dealing with a one
[04:00] pip spread, even though one pip still sounds like a tiny amount. But let's make the commission more expensive. I've seen a lot of brokers out there charging $7 per lot. Now, if we put that up on the chart, you can see that a 0.1 is 70 cents, a 0.5 is 350, then $7, then $35, and for a 10-lot
[04:18] trade, you're looking at 70 bucks. Even at $7 per lot, you're still paying less than the cost represented by one full pip spread on EURUSD, and that's if the comparison account has virtually
[04:30] zero spread. That's the part that I think traders have never calculated, or a very small percentage if people have tried. They see a $7 commission and they're like, screw that, I'm keeping my money, and then happily trade somewhere else with zero commissions while potentially losing $10 per lot
[04:47] through the spread. The fee you can see on your statement isn't necessarily the expensive one. Now, don't misunderstand what I'm saying. I'm not saying commission brokers are always cheaper. They not because a raw account can have a spread and a commission The real equation is spread plus commission plus your slippage is your actual cost of executing each trade And there one more little trick to watch for
[05:09] If the broker says $3 commission per lot per side, you're paying $6 total because a buy position is one trade. And then closing that position is another trade.
[05:21] So you have to double it. So don't just compare numbers written on the broker's homepage. calculate what it actually costs you to get in and out of a trade. I'm telling you all of this because I'm currently working on a scalping strategy on a one minute time frame where I'm
[05:36] trying to get five or six pips out of the move. This is exactly why I just completely switched my broker. I'm now using blueberry markets as my primary broker because after doing this math, I was like, nope, I got to move. There's no point in the obsessing over risk to reward and entries
[05:52] and exit and execution time if I'm getting eaten alive by the spread. This took me a while to decide because I looked at like 55 different brokers. But after doing the math, dude, it's hands down a no-brainer. I genuinely at this point could give less of a shit what you do with your own personal account.
[06:07] These are just the numbers that I'm using now and it's like the best recipe for me. If you want to use them, go for it. I got a link down below. If not, what I need you to do is open your trading platform, whatever it may be,
[06:20] whatever broker you're using. Look at your average spread on the currency pair that you're trading or the asset that you're trading. Find your commission if they charge it. Find your average slippage and actually do the math
[06:34] because the most expensive trading fee might be one that you've never seen on your account statements. The hidden fees and trading that they never publicize will eat you alive.