Spread Cost Calculator
The silent tax on every trade you take.
Every time you open a trade, you start in the red by the spread. This calculator shows the exact dollar cost of that spread per trade, per month, and per year based on your typical trading frequency. It also shows spread as a percentage of your average profit target — so you can see how much of your edge the spread is eating.
What it is
The spread is the difference between the bid price (what you can sell at) and the ask price (what you can buy at). It's the broker's primary way of making money, and it's charged on every single trade you take. A 1.5-pip spread on EUR/USD costs $15 per standard lot per trade. If you take 40 trades a month, that's $600 a month — $7,200 a year. This calculator makes that annual cost visible so you can factor it into your strategy and broker selection.
When to use it
When evaluating a new broker — compare the annual spread cost at your typical trading frequency. When designing a scalping strategy — tight targets amplify the spread's impact. When reviewing why a back-tested strategy works on paper but not live — spread is usually the missing cost. And at least once a quarter, to remind yourself what you're paying in invisible trading costs.
The formula
Spread cost per trade = Spread (pips) × Pip value × Lot size Monthly cost = Cost per trade × Trades per month Annual cost = Monthly cost × 12 Spread as % of target: Spread % = Spread (pips) ÷ Average target (pips) × 100 Example: EUR/USD spread: 1.2 pips Lot size: 0.5 standard lots Pip value: $10 per standard lot Cost per trade = 1.2 × $10 × 0.5 = $6.00 At 30 trades/month: $180/month = $2,160/year With a 20-pip target: spread is 6% of target
How to use it
- 1. Enter your broker's typical spread for the pair
Use the average spread, not the minimum. Brokers advertise 'spreads from 0.1 pips' but the average is usually 1.0-1.5 pips for EUR/USD during London hours. Check during the session you actually trade.
- 2. Enter your typical lot size and pip value
Use the position size you actually trade, not a round number. If you typically trade 0.3 lots, enter 0.3. Pip value for USD-quote pairs is $10 per standard lot.
- 3. Enter how many trades you take per month
Be honest. Count every open — including the trades you close early, the ones you scale into, and the re-entries. Each one costs a spread.
- 4. Enter your average profit target in pips
This is the most revealing input. If your average target is 15 pips and the spread is 1.5 pips, the spread eats 10% of every winning trade. That's a cost most traders never calculate.
Common mistakes
- ✗Ignoring spread because it's 'only 1 pip.' One pip times 40 trades a month times 12 months is 480 pips a year. At $10 per pip per lot, that's $4,800 on a single standard lot. It adds up.
- ✗Using the broker's advertised minimum spread for calculations. The minimum only appears during peak liquidity. Use the average spread during the session you actually trade — it's always higher.
- ✗Scalping with a wide-spread broker. A 3-pip spread on a 5-pip target means 60% of your gross profit goes to the broker. No edge survives that. Scalpers need raw-spread accounts.
- ✗Forgetting that spread widens during news events and low-liquidity hours. If you trade during Asian session or around FOMC announcements, the actual spread you pay can be 3-5x the normal average.