How to use the trading cost calculator
- Choose your account currency. Every amount you enter is in that currency.
- Enter the spread, commission and slippage that one trade costs you on average. Commission is the round trip, entry and exit together. If you know the spread in pips, multiply it by the value of a pip for your position size.
- Enter your trades per month.
- Enter your average risk per trade in money: the amount you lose if the stop is hit.
- Enter your planned reward to risk, the distance to the target divided by the distance to the stop.
The calculator shows the cost per trade, as a share of your risk and in R, the cost per month and per year, the reward to risk you really have after costs, and the break-even win rate before and after costs. A split bar shows where each trade's cost comes from, and a line chart compares the break-even win rate with and without costs across reward-to-risk ratios.
The trading cost formula
cost per trade = spread + commission + slippage
cost in R = cost per trade ÷ risk
per month = cost per trade × trades per month
per year = per month × 12
reward = reward to risk × risk
effective reward = reward − cost
effective risk = risk + cost
effective R = (reward − cost) ÷ (risk + cost)
break-even win rate before costs = 1 ÷ (1 + R) = risk ÷ (risk + reward)
break-even win rate after costs = (risk + cost) ÷ (risk + reward)
win rate the costs add = cost ÷ (risk + reward)
Costs are paid on every trade, whether it wins or loses. A winner keeps its reward minus the costs. A loser loses its risk plus the costs. Setting the average result to zero, win rate × (reward − cost) = loss rate × (risk + cost), gives the break-even win rate after costs, which simplifies to (risk + cost) ÷ (risk + reward). The costs therefore raise the win rate you need by exactly cost ÷ (risk + reward).
Worked example
A trader pays 4 in spread, 7 in commission and 2 in slippage per trade, takes 40 trades a month, risks 100 per trade and plans a reward to risk of 2.
These are the numbers the calculator opens with. The 13 splits into 54% commission, 31% spread and 15% slippage.
The plan says 1:2, but after costs it is 1:1.65. A trader who needed to win one trade in three now needs to win 37.7%, so a win rate that was comfortably profitable can sit close to break-even once costs are counted.
How costs eat your edge
A fixed cost in R comes off every trade, so it subtracts straight from your expectancy. Take a strategy that wins 45% of trades at a reward to risk of 2. Before costs the expectancy is 0.45 × 2 − 0.55 = +0.35R per trade. With the 0.13R cost from the example it becomes +0.22R. The costs have eaten 37% of the edge.
That is why a small edge is fragile. An expectancy of +0.10R before costs becomes −0.03R after a 0.13R cost: a winning system on paper that loses money in practice. The expectancy calculator shows an edge in R, and your cost in R is the number to compare with it.
Costs are a fixed amount, not a fixed share of the trade. A spread of 1 pip is 0.1R on a 10 pip stop and 0.2R on a 5 pip stop, so a tighter stop makes the same spread twice as expensive in R.
Why tight stops and frequent trading cost the most
The same 13 on a risk of 50 is 0.26R, and it lifts the break-even win rate from 33.3% to 42.0% at a reward to risk of 2. Tight stops make costs large in R terms, which is why scalpers watch spread so closely.
The gap between the two break-even lines on the chart is widest for small targets. At a cost of 0.13R:
Frequency multiplies everything. The same 13 per trade costs $6,240 a year at 40 trades a month and $62,400 a year at 400 trades a month. A strategy that takes many trades needs an edge per trade that is large compared with its cost, or its costs will be larger than its profit.
Where to find your real costs
- Spread. Take the typical spread in pips for the pair and session you trade and multiply it by the value of a pip at your size. A 1.2 pip spread on a position worth 5 a pip costs 6.00. The pip value calculator gives the value of a pip. Spreads widen around news and at the open and close of sessions.
- Commission. Read it from your broker's schedule and then confirm it on a statement, entry and exit together. Brokers quote per side or per round trip, so check which one you are reading.
- Slippage. Compare the price you planned with the price you were filled at, across many trades. Losses larger than your planned −1R are a sign of it, or of a stop that was moved. The slippage entry and the article on what slippage is and how to reduce it cover how it arises.
- Other costs. Overnight swap or financing, exchange fees and platform fees are not separate fields here. Add their average per trade to the commission if you want them counted. Your net P&L already includes the ones your platform reports.
If you are unsure, enter a figure on the cautious side and look at how much the answer moves. The risk reward ratio calculator turns entry, stop and target into the reward to risk you plan to enter here.
Common trading cost mistakes
- Counting only the spread. Commission and slippage are costs too, and slippage mainly hits market and stop orders.
- Using one side of the commission. If your commission is quoted per side, double it for a round trip.
- Treating a zero-commission account as free. The cost is usually in the spread instead.
- Backtesting with no costs. A backtest without spread and commission shows profits that live trading is unlikely to match.
- Using the average spread at the wrong time. The spread you pay at the open or during news can be several times the daily average.
- Comparing strategies before costs. A system with a small target and many trades can look better than a slower one until costs are included.
- Ignoring how costs grow with trade count. Doubling your trades doubles your costs, while your edge per trade stays the same.
What the calculator does not know
It uses one average cost for every trade, but real costs vary with size, session and news, and the cost of a stop-out is often larger than the cost of a target fill. It treats the cost as equal on winners and losers.
It does not know your win rate, so it shows the win rate you need and not the one you have. It leaves out overnight financing, taxes, withdrawal fees and any cost in another currency, which you should convert first. And it models the costs as a fixed amount, not as a percentage of position size. Nothing here is investment advice.
Frequently asked questions
How much do trading costs affect profitability?
They take a fixed amount from every trade, so they matter most when the edge per trade is small. In the example a cost of 0.13R reduces a +0.35R expectancy to +0.22R, a loss of 37% of the edge. If the cost equals the edge, the strategy earns nothing on average.
How do you calculate the cost of a trade?
Add the spread, the commission for the round trip and the slippage, all in money. In the example that is 4 + 7 + 2 = 13. Divide by the amount you risk to get the cost in R, here 13 ÷ 100 = 0.13R.
How do trading costs change the break-even win rate?
They raise it by the cost divided by the sum of risk and reward. At a reward to risk of 2 and a cost of 13 on a risk of 100, the break-even win rate goes from 33.3% to 37.7%, which is 4.3 points more. The line chart shows the same effect at every reward to risk.
What is reward to risk after costs?
It is the reward to risk you really have once the costs are paid: (reward − cost) ÷ (risk + cost). A planned 2R with a cost of 13 on a risk of 100 is 187 ÷ 113 = 1.65R. The planned figure overstates what a winner earns relative to what a loser costs.
Why are costs added to the risk as well as taken from the reward?
Because you pay them on every trade, including the losers. A stopped-out trade loses the distance to the stop plus the spread, commission and slippage, so the loss is larger than the risk you planned. A winner earns its reward minus the same costs.
Does spread count as a trading cost?
Yes. The spread is the gap between the buy and sell price, and you cross it when you open and close a trade. It is the main cost on many accounts, including some with no commission.
How do I work out my slippage cost per trade?
Take the difference between the price you planned and the price you were filled at, multiply by your position size, and average it over many trades. Losses that exceed your planned −1R are a signal, and a journal that records fill prices makes them easy to find.
What cost per trade is too high?
There is no fixed limit, so judge it against your edge. Compare your cost in R with your expectancy in R before costs. The closer they are, the less room you have for a worse fill or a wider spread, and when the cost is equal or larger, the system loses money after costs.
Do costs matter more for scalping or swing trading?
Scalping, because the stop and target are small while the costs are a fixed amount and are paid many times. The same 13 is 0.26R on a risk of 50 and 0.13R on a risk of 100, and the number of trades multiplies it again. A wider stop and fewer trades spread the cost thinner.