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Can we really beat trading costs?

  • #21
  • Sep 5, 2017 11:54am Sep 5, 2017 11:54am
Quoting Quickly
{quote} 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.
Seems to me being ignored seems to an indication you said something sensible
I live entirely from the growth of my personal trading account
  • #22
  • Sep 5, 2017 12:14pm Sep 5, 2017 12:14pm
Spread is the real killer. That's why the brokers' laugh all the way to the bank.

Example:

( lets assume 1 Pip = $1 for simplicity)


Before trade opened
----------------------
Balance = $1000
Equity = $1000
Profit = $0

Trade Opened
-----------------
Symbol = EURUSD
Spread = 3 pips
Balance = $1000
Equity = $997 -> Note: your equity is reduced by $3. In other words, the broker has made $3
Profit = -$3


Lets assume the trade is now in profit of 4 pips or $4 and the trader closes the trade.

(Note: For you to make $4 profit, the price has to move 7 pips in your favour because the broker bags another $3 or 3 pip spread)

Trade Closed.
---------------
profit = $4
Balance = $1004
Equity = $1004


Summary

Each time you complete a trade cycle( open and close) for a symbol, you are paying twice the spread of the symbol to the broker.
  • #23
  • Sep 5, 2017 12:20pm Sep 5, 2017 12:20pm
Quoting Nico1359
{quote} 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%
Many data points can be used in various ways. Some can give a false impression. As an example another data point shows your average trade pips is 1.5. Makes you look like an extreme scalper :-)

Main concern of yours is whether the commissions were too large relative to profits.

Combining average profit ($27) and average loss ($20) your average trade has an approximate P/L of $23 with commission cost of $1.57. Nothing wrong with that ratio. Your trading performance is far more important than your commission costs. If you add 10 wins that's $230 gain but if you remove 10 commissions that's just a $16 gain.
  • #24
  • Sep 5, 2017 1:42pm Sep 5, 2017 1:42pm
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...
If your only cost is spread then you are not using an ECN broker. With an ECN, the spread on EUR/USD is virtually non-existent (at this moment it is 0.1 pip). When you trade the approach I do, trading M5 charts and using very tight stops, this is extremely important. To get this benefit
  • #25
  • Sep 5, 2017 1:49pm Sep 5, 2017 1:49pm
Quoting Nico1359
{quote} If your only cost is spread then you are not using an ECN broker. With an ECN, the spread on EUR/USD is virtually non-existent (at this moment it is 0.1 pip). When you trade the approach I do, trading M5 charts and using very tight stops, this is extremely important. To get this benefit

But what are your fees per turn? probably equivalent to 0.5 of a pip or so
I live entirely from the growth of my personal trading account
  • #26
  • Sep 5, 2017 1:57pm Sep 5, 2017 1:57pm
Quoting EUScalper
Every broker that I've seen seems to offer a commission-free account. Obviously your spread would be wider but if the wider spread doesn't make a significant difference in your strategy then that'll be a way to go.
It does make a difference for my trading approach, which is why I trade an ECN broker and not a market maker.
  • #27
  • Sep 5, 2017 1:58pm Sep 5, 2017 1:58pm
Quoting EUScalper
{quote} IC Markets and Pepperstone have commission-free accounts and they're both ECN. I'm not sure what you mean.
And sadly, neither accept US clients.
  • #28
  • Sep 5, 2017 2:05pm Sep 5, 2017 2:05pm
Quoting GuyBaker
{quote} But what are your fees per turn? probably equivalent to 0.5 of a pip or so
I explained it in the first post. Works out to $0.70 for 0.1 lots.
  • #29
  • Sep 5, 2017 2:06pm Sep 5, 2017 2:06pm
Quoting EUScalper
{quote} Both IC Markets and Pepperstone offer commission-free accounts AND they're both ECN brokers.
Yeah, but not for me in the US. And I'm yet to find one ECN for US traders that is commission-free.
  • #30
  • Sep 5, 2017 2:41pm Sep 5, 2017 2:41pm
Quoting Nico1359
{quote} I explained it in the first post. Works out to $0.70 for 0.1 lots.
well yeah, sorry missed that, so you are paying one way or another.
I live entirely from the growth of my personal trading account
  • #31
  • Sep 5, 2017 3:37pm Sep 5, 2017 3:37pm
Is it realistic to expect ECN access without paying commissions? I tend to think not. Small spreads plus commissions is about the best we can do.
Open to new approaches.
  • #32
  • Sep 5, 2017 4:35pm Sep 5, 2017 4:35pm
very easy to answer here:

many cant, some can.
  • #33
  • Sep 5, 2017 4:39pm Sep 5, 2017 4:39pm
Quoting TradeGraph
Summary Each time you complete a trade cycle( open and close) for a symbol, you are paying twice the spread of the symbol to the broker.
i dont understand this point.

you pay the spread both times, but both times only half the spread (ask-average price, average price-bid), so its one spread not twice (all for fix spread, for variable spread you need a true payed spread calculation, like only possible way to compare 2 brokers with own trades).
  • #34
  • Sep 5, 2017 4:50pm Sep 5, 2017 4:50pm
Quoting Nico1359
{quote} Yeah, but not for me in the US. And I'm yet to find one ECN for US traders that is commission-free.
Depends on what you're looking for/how you trade, I suppose. I've been at Tradersway for a while now and can't really complain. Execution is good. Customer service is ok. Slippage is minimal, even during high impact news.
  • #35
  • Sep 5, 2017 11:54pm Sep 5, 2017 11:54pm
Quoting Samer1970
{quote} 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.


How is that? If you see 2,5 as profit, you have already made 3+2,5.. so you are on profit 2,5... comission MAY not be calculated in this, but usually it is as well...
Profit is profit. Sure, if you are only looking at the bid price moving 2,5 pips etc to your favor, and closing trade because of that, you will lose, but even then one could not "see a value of 2,5 usd in profit"....
  • #36
  • Sep 6, 2017 1:26am Sep 6, 2017 1:26am
Quoting Mysteeri
{quote} How is that? If you see 2,5 as profit, you have already made 3+2,5.. so you are on profit 2,5... comission MAY not be calculated in this, but usually it is as well... Profit is profit. Sure, if you are only looking at the bid price moving 2,5 pips etc to your favor, and closing trade because of that, you will lose, but even then one could not "see a value of 2,5 usd in profit"....

THIS IS THE ANSWER TO YOUR QUESTION

Attached Image (click to enlarge)
Click to Enlarge Name: Screenshot1.png Size: 40 KB
GUYS BE AWARE FROM HUNTING YOUR STOP LOSSES BY YOUR BROKER & BY "GHOSTS"
  • #37
  • Sep 6, 2017 3:40am Sep 6, 2017 3:40am
Quoting Samer1970
{quote} THIS IS THE ANSWER TO YOUR QUESTION {image}
your highlited sentence is wrong! you pay not 2 times the spread (correct is one time true payed spread)! you pay one time the difference between average price and ask plus one time average price and bid.

i think he was putting in this sentence by mistake so wrong.
  • #38
  • Sep 6, 2017 5:27am Sep 6, 2017 5:27am
Yes! You buy at ask price, but you may only sell at bid... One spread.
If you choose to use hedge position to free your equity, then you pay spread twice, but then you as well have two positions open..

TradeGraph sure put sentence you are referring to by accident, since spread is not calculated double even in his example.

Sure you pay commission twice, but that is not spread, and usually commissions are calculated as round turn anyway...
  • #39
  • Sep 6, 2017 5:52am Sep 6, 2017 5:52am
Quoting Mysteeri
Yes! You buy at ask price, but you may only sell at bid... One spread. If you choose to use hedge position to free your equity, then you pay spread twice, but then you as well have two positions open.. TradeGraph sure put sentence you are referring to by accident, since spread is not calculated double even in his example. Sure you pay commission twice, but that is not spread, and usually commissions are calculated as round turn anyway...
ofcourse hedging you pay 2 times. many brokers have "close by" option to avoid it and close one with other.
but hedging is in 99,99% of the cases because of no plan in math and beginner style, no more advanced trader will use it, or at least he is then no advanced trader.
good traders dont waste money for nothing.
  • #40
  • Sep 6, 2017 6:36am Sep 6, 2017 6:36am
Quoting dukas_trader
{quote} ofcourse hedging you pay 2 times. many brokers have "close by" option to avoid it and close one with other. but hedging is in 99,99% of the cases because of no plan in math and beginner style, no more advanced trader will use it, or at least he is then no advanced trader. good traders dont waste money for nothing.


That´what I mean... I was just trying to figure out where that statement of double spreads came from..
Opening hedge is just same as stopping your trade and taking it again... only reasons why someone would use hedge instead sl/tp are:

1. You are short and you decide that actually you should be long.. By opening hedge first, before closing that original short position you are able to open as much lots as you were originally short with. That case only matters when you have too big leverage (your balance would´nt let you open same amount anymore.)

2. If you want super big leverage for your trade.
Say you have 250 on your account and 500x leverage.
Open 1 lot long 1 lot short, used margin goes back to zero.
Do it again a couple of times, and close all buy poisition (or sell positions).
Now you may have like 4 lots for that 250 €/$ balance.
Then hope stop out level does´nt hit
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