Scalping: small moves, repeated costs

Prerequisite: Backtesting without hindsight shortcuts

On a small screen, scroll the figure sideways or open it full size.

Learning objective

Calculate the effect of repeated execution costs before judging a short-horizon method.

Scalping targets short holding periods and comparatively small price moves. It requires a fully specified entry and exit process, not simply a fast chart. Frequency increases the importance of execution quality, attention and aggregate exposure; a large number of trades is not itself an edge.

Model the complete round trip: spread, commission, expected slippage and any applicable conversion or funding. Costs must match the legal entity and product, and quote availability is not execution certainty. A limit-order simulation also needs a realistic fill rule instead of assuming every chart touch fills.

Evaluate gross and net outcomes separately. A small change in spread can consume much of a short target. Record missed trades, adverse fills, interruptions and maximum session loss rather than only attractive entries. A demo can test workflow, but cannot establish that real execution will match it.

Common mistakes

Do not double-count spread when the simulated entry and exit already use bid and ask. Do not infer profit from a high win rate alone; average loss and all costs matter.

Practice

Construct five invented trades with gross gains and losses. Deduct a stated round-trip cost from each and repeat after doubling the cost to test sensitivity.

Sources & further reading

• IG — Beginners guide to scalping
• IG — CFD trading costs and charges