Can we really beat trading costs? | Forex Factory

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Can we really beat trading costs?

  • #1
  • First Post: Sep 4, 2017 3:03pm Sep 4, 2017 3:03pm
I had this come up on another trading forum that I'm on and it got me thinking... The forum in question is mostly filled with equities and derivatives traders, all of whom tend to be of the opinion that Forex is not beatable by the retail trader in the long run. I have been posting my results there and the topic that has come up is that of commissions. I currently trade on an ECN platform and pay around $7 round-turn. Given that my standard lot size is 0.2 that usually works out to around $1.40 on EUR/USD. That doesn't sound bad, but looking at my total stats, it just seems so much worse.

My average trade in gross is currently $5.28. Average commission is $1.57. So the commission makes up just under 30% for my current return. Although, I'm being told left and right by most of these stock guys (a lot of whom have spent years as institutional traders/floor traders, etc) that my current rate of return is unsustainable (probably true) and that I'm on a lucky streak where the commissions will eventually be the downfall of my account once my "luck" runs out.

I try not to let detractors get in my head too much, but it raises an interesting point. Are we spending too much on commissions in ECN to have a positive expected value? I haven't had good experiences with non-ECN trading and have been of the opinion that it creates a conflict of interest between the broker and client wherein the market maker needs the client to lose to avoid liability... I don't know. Thoughts anyone?
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  • #2
  • Sep 4, 2017 3:18pm Sep 4, 2017 3:18pm
I beat binary options, the brokers have a 19% edge against me from the off. So yes we can.
I live entirely from the growth of my personal trading account
  • #3
  • Sep 4, 2017 3:29pm Sep 4, 2017 3:29pm
Depends mostly on TP/SL size.
The smaller the TP/SL the more important the commission is. Much more of an issue for scalpers than swing traders.
If your TP is 100 pips then .7 pips has very little influence on long-term results. (.7%)
If your TP is 10 pips then .7 pips has a much larger influence on long-term results. (7%)
  • #4
  • Sep 4, 2017 3:33pm Sep 4, 2017 3:33pm
Quoting srt
Depends mostly on TP/SL size. The smaller the TP/SL the more important the commission is. Much more of an issue for scalpers than swing traders. If your TP is 100 pips then .7 pips has very little influence on long-term results. (.7%) If your TP is 10 pips then .7 pips has a much larger influence on long-term results. (7%)

Agree. Probably 25 pips stop and target is the minimum one should consider.
I live entirely from the growth of my personal trading account
  • #5
  • Sep 4, 2017 4:04pm Sep 4, 2017 4:04pm
Quoting Nico1359
. My average trade in gross is currently $5.28. Average commission is $1.57. So the commission makes up just under 30% for my current return. Although, I'm being told left and right by most of these stock guys (a lot of whom have spent years as institutional traders/floor traders, etc) that my current rate of return is unsustainable (probably true) and that I'm on a lucky streak where the commissions will eventually be the downfall of my account once my "luck" runs out. I try not to let detractors get in my head too much,...
I looked @ your TE a bit closer & I think you're explaining the commission percentage a bit incorrectly. 30% would be very hard to overcome unless you're a very good trader.
Your average commission per trade is $1.57.
Your average winning trade is $27 so 1.57 is 5.8% for your winning trades.
Your average losing trade is $20 so 1.57 is 7.9% for your losing trades.
  • #6
  • Sep 4, 2017 4:20pm Sep 4, 2017 4:20pm
My suggestion would be to trade the higher timeframes - for example, H4 and above - where one trades less often (i.e. less commissions) and the commission is a smaller percent of pip/$ gains.
  • #7
  • Sep 4, 2017 4:38pm Sep 4, 2017 4:38pm
With the different Forex brokers I've been they charge a fraction of one pip, meaning trading with $1.00 per pip I'm paying $0.70 commission.

Trading stocks with TradeStation, they charge flat $2.00 round trip (on a few hundred shares), meaning trading with 100 shares (equivalent to $1.00 per pip) I'm paying $2.00 in commission. On top of that I have to pay exchange fees and data fees, which are free in Forex.

However, on larger position sizes trading stocks has the advantage ($10/pip versus $1,000 shares, for example) because the stock commission is a flat rate, not a percentage of the position size.

That being stated, I really can't imagine how a fraction of one pip can destroy your profitability, no matter how big your positions. I guess maybe if one is going for only 3 or 4 pips at a time...
  • #8
  • Sep 4, 2017 5:00pm Sep 4, 2017 5:00pm
Quoting srt
{quote} I looked @ your TE a bit closer & I think you're explaining the commission percentage a bit incorrectly. 30% would be very hard to overcome unless you're a very good trader. Your average commission per trade is $1.57. Your average winning trade is $27 so 1.57 is 5.8% for your winning trades. Your average losing trade is $20 so 1.57 is 7.9% for your losing trades.
Yes, but...

My total commissions plus swaps are -$473.66

My total gross for the year is $1,564.30 (This is from an excel spreadsheet I use. I wasn't trading my current approach last year so factoring that out)

-$473.66 / $1,564.30 = -30%
  • #9
  • Sep 4, 2017 5:13pm Sep 4, 2017 5:13pm
Quoting EUScalper
{quote} Based on the past 5 trading days that I've been live at IC Markets (Pepperstone would be similar), I've been charged $35.50 in commission while my take-home was $464.50, so ignoring positive and negative swap, they're taking about 7%. I'm fine with them taking 7% because both IC Markets and Pepperstone provide good service and value for that 7%. Having said that, I'll start shopping around if they starting taking 10% or more. Yes, I believe trading costs can be beat using brokers that provide good value.
There is also a rebate program, on paybackfx.com. Saves 1.5$ per lot. OR 21.4%. http://www.paybackfx.com/brokers I use it for IC markets but thye offer it for most brokers.
Learn, a forex trader must, unlearn and relearn he will.
  • #10
  • Sep 4, 2017 5:17pm Sep 4, 2017 5:17pm
Quoting COGSx86
{quote} There is also a rebate program, on paybackfx.com. Saves 1.5$ per lot. OR 21.4%. http://www.paybackfx.com/brokers I use it for IC markets but thye offer it for most brokers.
Huh.. Just like rakeback for poker it looks like

I looked at the link. For my broker it would appear that you have to be setting up a new account?
  • #11
  • Sep 4, 2017 5:43pm Sep 4, 2017 5:43pm
No one identified the real problem:

The problem is not in the commission the broker charged,the problem is that you are over leveraging to get fast returns......your leverage is to much for your account size
atheer1
  • #12
  • Sep 4, 2017 6:12pm Sep 4, 2017 6:12pm
Quoting atheer1
No one identified the real problem: The problem is not in the commission the broker charged,the problem is that you are over leveraging to get fast returns......your leverage is to much for your account size
I wouldn't be trading with this kind of leverage on any substantial amount of capital. I started this account with $100 knowing that I was going to be trading with awful risk management at the outset because I really don't care if I lose $100. The plan is to scale down the amount of leverage I use as the account grows.
  • #13
  • Sep 4, 2017 6:18pm Sep 4, 2017 6:18pm
Quoting Nico1359
{quote} I wouldn't be trading with this kind of leverage on any substantial amount of capital. I started this account with $100 knowing that I was going to be trading with awful risk management at the outset because I really don't care if I lose $100. The plan is to scale down the amount of leverage I use as the account grows.
Yes as you decrease your used leverage commission will not be a problem at all
atheer1
  • #14
  • Sep 4, 2017 6:20pm Sep 4, 2017 6:20pm
Quoting Nico1359
{quote} Huh.. Just like rakeback for poker it looks like I looked at the link. For my broker it would appear that you have to be setting up a new account?
Im not sure what you mean? A rakeback? edit: googled this and I suppose it would be the same.

As for settings up a new account for example with ICmarkets, you can easily transfer your funds between accounts. Takes no longer then 2 minutes. As for signing up to payback, I cant remember how this works. YOU just have to setup your account on their website and tells you how. ITs not hard at all and doesnt cost you a thing.

I have been using it since Jan 2017, and I wish I found it sooner, you dont realize how much you actually can save. Have had many withdraws to my paypal account. Quick and easy. Im not a agent or anything, just sharing my experience.
Learn, a forex trader must, unlearn and relearn he will.
  • #15
  • Sep 4, 2017 7:37pm Sep 4, 2017 7:37pm
Don't cash back programs have a higher spread?
  • #16
  • Sep 4, 2017 11:58pm Sep 4, 2017 11:58pm
Quoting pakeha
Don't cash back programs have a higher spread?
My accounts are ECN and it hasn't changed spreads.

read the reviews here http://www.myfxbook.com/reviews/reba...ckfx/1114938,1

The first guys comments show he didn't understand how the process works and the FX representive clarified for him.
Learn, a forex trader must, unlearn and relearn he will.
  • #17
  • Sep 5, 2017 3:56am Sep 5, 2017 3:56am
I think you have mixed up a great deal of numbers and have confused me quite a bit. First you pay $7 to do transactions, which sounds like an equity trade cost. Then you are trading 0.2 lots for $1.40 of transaction costs? WOW! That is pretty cheap. Unfortunately none of your math makes sense, so here is my knowledge on the matter. If the current spread on EURUSD for a "Forex" broker is 1.3 pips, then if you entered and immediately exited, with 0.02 lots, it would cost you $0.26 (20 cents a pip). After price moves 1.3 pips in your favor, the rest is profit. At 0.2 lots, it costs $2.60 ($2 a pip). At 2 lots, it costs $26.00 ($20 a pip). If you are paying more than that, either you are not trading spot Forex, or you need a different broker. My only cost for trading is spread.
You cannot be extraordinary by being normal
  • #18
  • Sep 5, 2017 4:27am Sep 5, 2017 4:27am
Quoting dkrock
I think you have mixed up a great deal of numbers and have confused me quite a bit. First you pay $7 to do transactions, which sounds like an equity trade cost. Then you are trading 0.2 lots for $1.40 of transaction costs? WOW! That is pretty cheap. Unfortunately none of your math makes sense, so here is my knowledge on the matter. If the current spread on EURUSD for a "Forex" broker is 1.3 pips, then if you entered and immediately exited, with 0.02 lots, it would cost you $0.26 (20 cents a pip). After price moves 1.3 pips in your favor, the rest...
which broker do you use? 1.3 avg spread?
  • #19
  • Edited 4:52am Sep 5, 2017 4:38am | Edited 4:52am
Quoting srt
Depends mostly on TP/SL size. The smaller the TP/SL the more important the commission is. Much more of an issue for scalpers than swing traders. If your TP is 100 pips then .7 pips has very little influence on long-term results. (.7%) If your TP is 10 pips then .7 pips has a much larger influence on long-term results. (7%)

THE GREAT BRIAN JOHN 'BRIJON" WAS TRYING TO EXPLAIN TO ALL FF TRADERS HERE THE IMPORTANCE OF EQUITY AND THE PRICE OF EACH TRADE YOU MAKE. AND HOW YOU WILL LOSE YOUR MONEY BUT AS HE WAS TOO OLD AND STUBBORN IN HIS OPINIONS , NO LISTENED TO HIM, BUT SOME DID AND I RESPECT THIS MAN AND I RESPECT WHOEVER WAS SUPPORTING HIM

ALSO, I WOULD LIKE TO THANK FAVORITE - THE AGGRESSIVE TRADER WHO WAS TRYING TO EXPLAIN THE EQUITY TO ME IN SEVERAL POSTS BUT AS WE HAVE SOME "LAGGING" IN ENGLISH , WE HAD SO MANY FIGHTS AND I DO APOLOGIZE FROM FAVORITE AS I WAS REALLY IGNORANT THAT I COULD NOT UNDERSTAND HIS LESSONS ABOUT EQUITY AND PRICE OF A TRADE HE SHOWN IN FF POSTS BETWEEN ME AND HIM.

THEREFORE FROM MY BUILT UP EXP. FROM BOTH WITH GREAT RESPECT, I WOULD LIKE TO SUMMARIZE THE EXP. I HAD BUILT BY MAKING CODES THAT WHILE TESTING THEM I SAW SO MANY ASPECTS THAT WHILE REAL TRADING YOU WILL NOT SEE AND I HOPE THIS WILL HELP MANY OF YOU HERE TO UNDERSTAND THE EQUITY AND THE COST OF A TRADE.

 

  1. WE ALL LOOK ALWAYS HOW TO INCREASE OUR BALANCE, AND WHEN IT GOES UP YEA WE ARE HAPPY AND WHEN IT GOES DOWN, OHH, I JUST MUST TO DEPOSIT MORE, TO KEEP IT HIGH TO ENABLE ME TO TRADE. BALANCE IS NOT SO IMPORTANT FOR YOU AS A RETAIL TRADER, THE IMPORTANT FOR YOU IS THE EQUITY, THIS ITEM SHOULD INCREASE AND IF IT IS INCREASED , THEN NO PROBLEM , THE BALANCE WILL INCREASE WITH IT WHEN EVER YOU CLOSE NON HEDGED INSIDE THE SAME PAIR AS CALLED A NON NODGED TRADE.

  1. EACH TRADE YOU MAKE IT HAS A PRICE YOU PAY IT DOUBLE TO THE MARKET, YES SIR, HOW IS THIS TRUE ?, WELL, ALL OF YOU KNOW THAT IF YOU MAKE ONE TRADE, THEN THE BROKER WILL REMOVE FROM YOUR"EQUITY" AT WHICH IT IS A DERIVATIVE OF THE BALANCE THE SPREAD, EVEN IF YOU MAKE HEDGING OR NODGING , THE PRICE WILL BE REMOVED AS ONE TIME. FOR ANY TRADE YO MAKE EVEN IF IT IS HEDGED OR NODGED .. OK,,, WE ALL KNOW THIS, CAN YOU EXPLAIN MORE - HOW IT IS DOUBLED? , YES , FOR EXAMPLE , I MAKE ONE TRADE EU OF SIZE 0.1 LOT OF SPREAD 30 POINTS ( THIS IS MY ACCOUNT REAL SPREAD ) THEN I WILL PAY TO THE BROKER USD 3. THEN I WILL WAIT 30 POINTS TO RETURN BACK MY SPREAD THIS IS MY SECOND PAYMENT OF WAITING THE 30 POINTS TO COME TO ME BACK BETWEEN THE ASK AND THE BID, SO MY ACCOUNT WILL HAVE LOST 3 USD ONCE I HAVE OPENED THE TRADE AND I WILL WAIT -3 USD TILL THE BID IS TOUCHING THE 30 POINTS IF IT IS LONG OR THE ASK TO TOUCH THE 30 POINTS IF IT IS SELL, BUT THE DISASTER IS THAT, MOST OF THE NEW TRADERS DO NOT CALCULATE THIS, AND ONCE HE SEES A VALUE OF 2.5 USD IN HIS PROFIT, THEN HE WILL CLOSE THE TRADE AND THIS IS THE BIGGEST MISTAKE, AS YOU WILL LOOSE 0.5 USD FROM YOUR EQUITY AS YOU DID NOT EVEN RETURN THE PRICE OF THE TRADE.

  1. STOP LOSS AND PROFIT MUST BE RELATED TO EQUITY NOT TO FIXED PROFIT VALUE BCZ YOU ARE NOT TRADING ONE PAIR, I CHALLENGE YOU ALL, IF THERE IS ONE TRADER IS TRADING ONE PAIR ALONE, WE ARE ALL TRYING TO CATCH ANY PROFIT FROM ANY PAIR, SO WE ARE OPENING TRADES HERE AND THERE AS PER MECHANICAL OR INDICATOR OR OUR HEART SENSATION... OR JUST COIN TOES.... SO THE MISTAKE IN STOP LOSS IS THAT YOU ADD STOP LOSS LETS SAY 30USD TO 0.1 LOT, ONCE IT IS TOUCHED YOU WOULD SAY, AHHH I LOST 30 USD.... NO MY FRIEND, YOU HAVE LOST 33 USD PLUS WAITING 3 USD TO PASS FROM THE SPREAD ZONE SO YOUR TOTAL LOSS IS 33 ACTUAL AND 33 + 3 MENTAL. THEN YOUR EQUITY IS LESS BY 33 ..... NOT 30 MY HEART.

  1. FOR THE TAKE PROFIT FOR THE SAME EXAMPLE, YEA I MADE MY TP = 30 USD AND I CATCH IT, NO MY FRIEND, YOUR PROFIT IS 27 USD FOR 0.1 LOT AND THERE IS MENTAL LOSS OF 3 USD TO PASS THE SPREAD ZONE.




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GUYS BE AWARE FROM HUNTING YOUR STOP LOSSES BY YOUR BROKER & BY "GHOSTS"
  • #20
  • Sep 5, 2017 11:00am Sep 5, 2017 11:00am
Quoting atheer1
No one identified the real problem

I think they did, actually: srt and Guy Baker did, in posts #3, #4 and #6 on the previous page, but nobody took much notice of them.
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