Scalping: why costs decide the outcome
What you learn in 3 minutesScalping means taking many small trades, often aiming for a few pips each. On AUD/USD, one pip on a standard lot is 10 units of the quote currency, which is US dollars, converted at the current rate to Australian dollars. At around 0.6640, that is roughly A$15 per pip on one standard lot. This lesson shows why the spread and commission decide the result before any technique does.
Twenty trades of three pips against a spread of 1.2 pips
| Step | Amount | Note |
|---|---|---|
| Trades per day | 20 | the number of trades in this example |
| Target per trade | 3 pips | the gross move the price must make in your favour |
| Spread per trade | 1.2 pips | the gap between the buy and sell price, quoted by the broker |
| Net pips per trade before commission | 1.8 pips | 3 pips minus 1.2 pips |
| Net pips per day before commission | 36 pips | 20 trades times 1.8 pips |
| Value of one pip on one standard lot | A$15 | 10 US dollars converted at 0.6640 |
| Gross result per day | A$540 | 36 pips times A$15 |
| Commission per trade | A$7 | a typical round-turn commission, but this varies between brokers |
| Commission per day | A$140 | 20 trades times A$7 |
| Net result per day | A$400 | A$540 minus A$140 |
The broker may round the pip value, charge a wider spread at busy times, or add a swap if the position is held overnight. Commission and spread vary between brokers, so check the actual figures on your platform.
The mistake people make here
The common mistake is to count the full three pips as profit and ignore the spread and commission. In the example above, the spread alone removes 1.2 pips from each trade, leaving only 1.8 pips before commission. After A$7 commission per trade, the net result is A$400, not A$540. Always subtract the spread and commission from your target before deciding whether a trade is worth taking.Check yourself
If the spread were 1.5 pips instead of 1.2, what would the net pips per trade be, and what would the daily gross result be before commission?
Net pips per trade: 3 minus 1.5 = 1.5 pips. Daily net pips: 20 times 1.5 = 30 pips. Daily gross result: 30 pips times A$15 = A$450. After A$140 commission, the net result is A$310.
What is the value of one pip on one standard lot of AUD/USD when the rate is 0.6640?
One pip is 10 US dollars. Converted at 0.6640, that is 10 divided by 0.6640, which is approximately A$15.06. This is often rounded to A$15.