Spread, Slippage and Rebates: How to Measure Your Real Execution Cost
Most traders compare brokers on advertised spread. Advertised spread is the smallest component of what you actually pay, and the only one the marketing department controls. Your real execution cost is spread plus commission plus slippage plus swap, minus any rebate — measured on your own fills, not on a quote page.
The four components
- Spread — quoted, variable, and widest exactly when you most want to trade. The average matters far less than the distribution.
- Commission — fixed and honest on raw-spread accounts, typically $6–$7 per standard lot round turn.
- Slippage — the gap between requested and filled price. Usually the largest hidden cost, and the one nobody logs.
- Swap / funding — irrelevant to a scalper, decisive to anyone holding for days.
Measuring slippage properly
Export your trade history and, for every order, record requested price, filled price, and the time of day. Then split the results three ways: by session, by order type, and by whether a scheduled event was within fifteen minutes.
Two numbers matter. Mean slippage tells you the ongoing tax. Slippage asymmetry tells you something more important: whether negative slippage is systematically larger than positive. Genuine market slippage is roughly symmetrical over a large sample. Consistently one-sided slippage is a routing or pricing decision, not market noise, and it is the strongest single reason to move a book elsewhere.
A hundred trades is enough to see the pattern. If negative slippage outweighs positive by more than two to one across sessions, the venue is the problem, not the market.
Building the all-in number
For a strategy averaging 40 round turns a month at one standard lot, on a raw-spread account with a 0.2 pip average spread, $7 commission and 0.3 pips of mean negative slippage:
- Spread: 0.2 pips ≈ $2.00
- Commission: $7.00
- Slippage: 0.3 pips ≈ $3.00
- All-in per lot: ≈ $12.00 → roughly $480 per month at 40 lots.
Now apply a $5 per-lot rebate: the all-in cost falls to about $7 per lot, or $280 a month. That is a 42% reduction in transaction costs with no change whatsoever to the strategy — which is why rebates matter more to an active trader than any deposit bonus ever will.
The comparison that actually decides it
Broker A advertises 0.0 pip spreads with $7 commission. Broker B advertises 0.8 pip “commission-free” spreads. On paper A costs 0.7 pips + $7; B costs 0.8 pips. Once you measure real fills, A prices at roughly $9 per lot all-in and B at roughly $11, before B’s wider slippage on news. The commission-free account is the expensive one, as it almost always is.
Execution quality tests worth running
- Session test. Place identical orders in Asia, London and New York for a month. Cost differences of 40% or more between sessions are common and change when your strategy should be running.
- Event test. Track fills within five minutes of high-impact releases. If slippage is an order of magnitude worse, either stop trading the event or budget for it explicitly.
- Size test. Compare fills at 0.1, 1 and 5 lots. Degradation with size tells you the real capacity of both your strategy and your venue.
- Stop test. Measure fills on stop orders separately from market orders. This is where the difference between a good and a bad venue is largest.
What to do with the result
Put the all-in cost into your expectancy calculation. A strategy averaging 8 pips per trade with a 1.2 pip all-in cost is giving up 15% of its edge to execution; the same strategy averaging 3 pips is giving up 40% and is probably not viable at all. Strategies do not usually stop working because the market changed — they stop working because the costs were never modelled honestly in the first place.
Re-run the measurement quarterly. Spreads, routing and liquidity providers change, and the account that was cheapest a year ago frequently is not today.
Research only, not advice. Leveraged trading carries a high risk of loss — see our risk and affiliate disclosure.