Please help: figuring out spread based on commission

Hi all,

Hope someone here can help me.

What formula do I use to calcualte ECN commissions into the spread (so that I can more properly backtest with the MT4 back tester)?

An example: USDJPY, AUD $5.50 per lot roundturn, with ECN spread 0.4

How do I then figure out my "total" (normal spread + commission included) spread in pips?

Thanks,
Roel

0.4 (Spread) + .55 (Commission in form of spread) = .95 (Total Spread w/commission)

Thank you! So the commission is always .55, or how does it vary depending on what pair you trade?

In the example you gave, I converted the commission ($5.50) to pips so you would know what the total spread would be if you weren't paying commissions.
So if your broker charged $6 in commission(for 1 lot) & had a .4 spread then your total spread would be .60 + .40 = 1.0 spread if you weren't paying commissions. Most pairs are close to $10/pip for 1 lot.

Here is the example I have for commission2spread in USD (the similar logic for AUD)
GBP/USD
Bid 1.54748
Ask: 1.54759
Actual spread = 1.54759 - 1.54748 = 0.00011 (11 points)
Broker's commission: $0.08USD per 1000 of USD
Thus, the commission per 1K of GBP
$0.08 * 1.54748 = $0.1237984 per 1K (micro lot) of GBP currency
Increase the micro lot of GBP currency by commission
$1547.48 + $0.1237984 = $1547.6037984
The spread equivalent of commission
1.5476037984 - 1.54748 = 0.0001237984 (12.38 points)
Total spread(spread + commission) = 0.00011 + 0.0001237984 = 0.0002337984 (23.38 points)

In case if the base currency is "USD" then the spread equivalent of commission would be == commission/1000

//The function to calculate the spread equivalent of commission:
// the input commission in USD per 1000 of USD
double commission2spread( double bid, double commission, bool baseUSD )
{ if( baseUSD ) return commission/1000 ;
return bid*commission/1000 ;
}

Note: To get a total spread the actual (ask-bid) spread and the spread equivalent of commission should be summed

Apparently, you may use the same logic relatively AUD (instead of USD) as well...

have fun...

Works for XXX/USD pairs only

For other pairs you should divide to pip value to XXX/USD