Spread Cost Calculator

The impact of spread on trade profitability is often overlooked. Going from a 3-pip spread to a 2-pip spread may not sound like much, and going from a 2-pip spread to a 1.8-pip spread may seem even less significant. But in both cases, depending on your trading style, the impact on profitability can be huge.

Use this calculator to quantify and compare the impact of spreads on various trade scenarios. (For an explanation of the math and some of the terms used, go to the Spread Cost Calculator help.)

The calculator is pre-populated with a scenario that might be typical for a conservative professional trader. We encourage you to substitute your own variables to explore different scenarios. For example, a more aggressive trader weighing the difference between 2 pips and 1.8 pips might enter the following values: Trading activity, 5 deals per day; Average deal leverage, 20:1; Past return on equity, 20%; Current spread, 2 pips; New spread, 1.8 pips.

Trading activity: deals
Avg. deal leverage: :1
Account equity:
Past return on equity: %
Current spread: pips
New spread: pips
See results below.

 
Number of trades per year =
 
Annual Trading Volume =
number of trades x leverage x account equity
 
 
Absolute Spread Cost =
 trading vol x spread 
2
 =
 =
 
 
Relative Spread Cost =
 absolute spread cost 
account equity
 =
 =
 
 
 
 
Return on equity =
with new spread
of account equity
 
 
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