Empty: didnāt say it requred less moneyā¦I said the cost of doing business is lower. But it DOES require more money.
Not too familiar with ECNā¦but hereās some USD/JPY futures math for ya:
I sometimes scalp the U/J futures. On that contract, a single pip is $12.50. Lets say I take 20 trades a day on average, with a win rate of 60%, and my average winner makes me $112.50, my average loser: $100. This is a realistic number, and a typical day may end up exactly like this for me.
Now, thatās 12 winning trades, at a total profit of $1,350. Minus 8 losing trades at a total loss of $800.
This leaves a net profit of $550. Not bad. BUTā¦we have comissions, at about $4.50 per trade (I generally trade 1 contract)
$4.50 X 20 trades = $90 comissions.
SOā¦ $550 net profit minus $90 comissions = $460 in total profits. Not bad.
Nowā¦lets take USD/JPY spot with an average spread cost of 1.5 pips. And to compare apples to apples, lets compare as if we traded on Oanda, and therefore could get exact position sizingā¦exact enough that a single pip change in USD/JPY would be exactly $12.50
So, same numbers, same resultsā¦only change is our average comission per trade, so lets start there:
$550 = net profits before spread (aka: comissions).
spread = 1.5 pips per trade, or $18.75 per trade.
20 trades at $18.75 spread cost per trade = $375 spread costā¦ or, as it really is comissions.
$550 net profit minus $375 spread = $175 per dayā¦less than half.
To put this in the bigger picture. Say 48 trading weeks a year, with 5 days in each week = 240 trading days a year.
yearly profit after comissions to trade yen futures - over $110,000 per year.
yearly profit after 1.5 pip spread to trade exact equivilent amount usd/jpy spot - exactly $42,000 per year
Thats scalping, and thats with a 1.5 pip spread, and targets averaging 9 pips.
If you scalp anything other than USDJPY or EURUSDā¦depending on the times you trade, and your brokerā¦ you may easily average more spread per trade.
TO put it another wayā¦ my EUR/USD and USD/JPY and USD/CHF futures trades cost me literally 1/3 of one pip in spread. It never changes. It never fluctuatesā¦ it is always exactly 1/3 of a pip, news or no news. Furthermore, it is only 0.45 pip spread on AUD/USD, USD/CAD. Itās about 0.65 pip spread on GBP/USD.Furthermore, I get GBP/AUD cross for about a 1.3 pips. I get EUR/JPY for about 0.7 pipsā¦etcā¦etc.
If your going for 20+ pips, and doing it only once or twice a dayā¦ this isnāt the biggest issue.
When you add that extraā¦sayā¦ pip, over the course of small scalps that are taken 15 - 30 times a dayā¦ that could literally be over half your entire profit for the year, gone, based on a single pip lost per trade.
Nevermind if much of my trading happens to be in AUD/USD, USD/CAD, or some cross pair.
hope this clears things upā¦
Jay
P.S. I tend to smile a bit when folks say āyaā¦but futures have comissonsā¦ spot doesnātā. A spread IS comissionā¦and in almost every case I can think ofā¦it is double, triple, or quadruple the comission cost in the futures marketsā¦ dollar per dollar anyway. No idea about ECNāsā¦lemme know more, like spread sizeā¦etc. May check that out sometime.