Are trading costs the main reason of losses in trading? | Forex Factory

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Are trading costs the main reason of losses in trading?

  • #1
  • First Post: Edited May 28, 2019 6:32am May 25, 2019 8:24am | Edited May 28, 2019 6:32am
Hi, I have been trading on forex for a long time and saw different reasons
why traders lose. There were lack of money management, systems, psychology,
greed, hope and so on. However all of them had one common problem.
They didn't control their TradingCost. Almost no one knew about such factor.
They can't explain why system can't work at broker with the lowest spreads ever,
but some guys use it successfully in other trading places.
No one wrote about it. It's difficult to calculate.
The reason is some components of TradingCost are hidden, for example slippages.
Some components, for instance spread, is difficult to measure on openings and closings as well.

What do you think about TradingCost?
  • #2
  • May 25, 2019 11:56pm May 25, 2019 11:56pm
I've never thought about this as being an issue before... Are you talking about spread costs?

Honestly, I've never thought about the tax filing parts of it either. Lol
Success is a daily habit
  • #3
  • May 26, 2019 4:15am May 26, 2019 4:15am
Exactly that what I said)
mostly traders think that TradingCost is only spreads and sometimes commission.
Actually TradingCost = average spread (on opening and closing) + commission in pips + average slippage*2

have you ever thought why some expert advisors work at Broker 1, but don't work at Broker 2. Because of TradingCost mostly.
  • #4
  • May 27, 2019 9:55pm May 27, 2019 9:55pm
This is actually why most business fails.
It's not about analytics, it's not about principle and it's not about money management because you can never know what'll happen.
Transaction costs are basically the biggest killers in trading and this doesn't even JUST involve commission.

Usually people with some sort of systems have restrictive clauses enacted upon their own trading desires.
A trend following system at its core with a method of exit would cost whatever parameters you set. So say you don't want to deal with a loss of something greater than 50% after appreciation. Your system would let you off at -51% of the overall gain. That's a pretty steep price just to get out of a trade. You just booked a gain where you only got half of what it was you wanted to get. These hidden transactions are ongoing and occur. If you have the best money management at the upper echelon of understanding, your end result would actually be break even at best after commissions. So

most trading systems here are
outright winners...commission/slippage says it's 20% of costs you give out.
system exit -50% give or take.
you're at a gain of 30%

A loss outright... -10% loss (try to keep it short you know), -20% fees
Your loss is 30% + your time.

Did I tell you the odds for losses/winners yet? It isn't 50%.
If you're wondering how there's 95% of failed traders the math isn't lying.

Out of 10 random-esque trades
Your numbers should be 7 losses outright
3 winners
2 of which break even.
and 1 you hope to whatever religion you like in order to give you results against the others.

And in order to be living the large life in trading you have to make it so that those 3 trades that are winners are
at the tips of their appreciation. And for your losses to be dwindled in some way shape or form, converted, or flatly put
never to appear in the first place. Which is a daunting task.
All of a sudden real estate isn't looking so shabby now is it?
  • #5
  • May 28, 2019 4:38am May 28, 2019 4:38am
Quoting Swisse
This is actually why most business fails. It's not about analytics, it's not about principle and it's not about money management because you can never know what'll happen. Transaction costs are basically the biggest killers in trading and this doesn't even JUST involve commission. Usually people with some sort of systems have restrictive clauses enacted upon their own trading desires. A trend following system at its core with a method of exit would cost whatever parameters you set. So say you don't want to deal with a loss of something greater than...
Absolutely agree
That's exactly what i mean

All traders need to minimize ZERO by minimizing total trading cost
  • #6
  • May 28, 2019 6:02am May 28, 2019 6:02am
trading cost , specifically rollovers should not be seen as expenses, in fact it should be seen as a paid insurance for your opened trade. those that have devoted their time to looking at charts or have access to orderbooks will know what i mean.

the only thing you need in fx is your stats. time tested stats that you can seriously rely on. i can be risking 20% to make 2% but if my stats are 1 loss in every 10 trade. i can still be extremely profitable. and no, im not talking about martingale..
  • #7
  • Edited 6:32am May 28, 2019 6:19am | Edited 6:32am
In this case i mean
Total Trading Cost = spread + slippages + commission

all you will spend for deal opening and closing
  • #8
  • May 28, 2019 12:52pm May 28, 2019 12:52pm
Quoting Lk009
In this case i mean Total Trading Cost = spread + slippages + commission all you will spend for deal opening and closing
No, you got it wrong; first its either spread only OR spread (a tiny one) PLUS comission its your cost to trade (depends on your broker of course).. there its no "slippage" or extra crap*2/233+658 +a/b

you are overthinking

second: those "cost" you mention COULD BE a problem ONLY if you are "scalping" where you are aiming for a few pips/points and the size of the spread/comission BECOME significantly large to mess with your targets !! if you trade with larger targets (like the ones that comes with longer timeframes) then its not an issue anymore !!

open any chart show bid and ask line in options.. set a 5 minute timeframe and then change it to 4 hours.. see how the "cost" (spread/comission) "disapear" ?? its now "diluted" by the targets inherent in a longer timeframe

There are only 2 reason why "traders" lose money: they dont know how to trade and they overthink everything.. period.. and yes, the reasons are THAT simple believe it or not
  • #9
  • May 28, 2019 1:13pm May 28, 2019 1:13pm
Quoting havo
{quote} No, you got it wrong; first its either spread only OR spread (a tiny one) PLUS comission its your cost to trade (depends on your broker of course).. there its no "slippage" or extra crap*2/233+658 +a/b you are overthinking second: those "cost" you mention COULD BE a problem ONLY if you are "scalping" where you are aiming for a few pips/points and the size of the spread/comission BECOME significantly large to mess with your targets !! if you trade with larger targets (like the ones that comes with longer timeframes) then its not an issue...
Oh, my friend)) thanks for your opinion. It's an additional proof of my thread. Nobody cares about this crap

Trading Cost influence depends on expectancy only, but not on TF, because you can trade M1 with 10 pips expectancy and D1 with 3 pips.
And if you have 3 pips Total Trading Cost, in the first case you will have a profit, but not in second.

Perhaps, if you had detailed stats of your trading, you would see impact.

P.S It's very useful knowledge for big traders, where slippages plays the key role
  • #10
  • May 28, 2019 1:34pm May 28, 2019 1:34pm
Quoting Lk009
In this case i mean Total Trading Cost = spread + slippages + commission all you will spend for deal opening and closing
its much more....like rollover, spread for exchanging your profit/loss from your trade to your broker account currency (when you dont hold different accounts or broker dont do automatic and its not same currency), securing fee for your balance against broker crash (with different securing it its different costs), opportunity costs for taking time and risk for trading....

for most people alone opportunity costs are so high against the possible win, so trading dont look a smart way and should be done as hobby very small a long time.
of course scalper , big daytrader ... people with big monthly volume or time to invest will have to look more to the cost parts.
  • #11
  • May 28, 2019 1:49pm May 28, 2019 1:49pm
Quoting PowerMoon
{quote} its much more....like rollover, spread for exchanging your profit/loss from your trade to your broker account currency (when you dont hold different accounts or broker dont do automatic and its not same currency), securing fee for your balance against broker crash (with different securing it its different costs), opportunity costs for taking time and risk for trading.... for most people alone opportunity costs are so high against the possible win, so trading dont look a smart way and should be done as hobby very small a long time. of course...

Is that you Dukas? Hiding behind a new handle yet using the same phrases?
  • #12
  • May 28, 2019 1:58pm May 28, 2019 1:58pm
Quoting PowerMoon
{quote} its much more....like rollover, spread for exchanging your profit/loss from your trade to your broker account currency (when you dont hold different accounts or broker dont do automatic and its not same currency), securing fee for your balance against broker crash (with different securing it its different costs), opportunity costs for taking time and risk for trading.... for most people alone opportunity costs are so high against the possible win, so trading dont look a smart way and should be done as hobby very small a long time. of course...
Agree, however in most of cases for retail traders the most dangerous costs are slippages, spreads (for exchanging as well) and commission.
  • #13
  • May 28, 2019 7:23pm May 28, 2019 7:23pm
Quoting Lk009
{quote} Oh, my friend)) thanks for your opinion. It's an additional proof of my thread. Nobody cares about this crap Trading Cost influence depends on expectancy only, but not on TF, because you can trade M1 with 10 pips expectancy and D1 with 3 pips. And if you have 3 pips Total Trading Cost, in the first case you will have a profit, but not in second. Perhaps, if you had detailed stats of your trading, you would see impact. P.S It's very useful knowledge for big traders, where slippages plays the key role
The lack of experience its clear on this post.. that or the "need" to argue just for the sake of it without knowing about the topic (same thing really just with the ego in the middle)..
  • #14
  • May 29, 2019 1:06am May 29, 2019 1:06am
Quoting havo
{quote} The lack of experience its clear on this post.. that or the "need" to argue just for the sake of it without knowing about the topic (same thing really just with the ego in the middle)..
Oh) nooo
I didn`t want to offend you
It`s just happened that we have very different opinions

Rregarding my experience. I think i have enough in this sphere)
  • #15
  • May 29, 2019 11:41am May 29, 2019 11:41am
Quoting EcoTrader
{quote} Is that you Dukas? Hiding behind a new handle yet using the same phrases?
Dukas had the basics nailed down there was nothing about the basics that he did not understand if Powermoon understands the basics to the same level that Dukas understand the basics then they are undeniably the same person because no one knew the basics quite like Dukas
  • #16
  • May 29, 2019 12:40pm May 29, 2019 12:40pm
Quoting Ross88
{quote} Dukas had the basics nailed down there was nothing about the basics that he did not understand if Powermoon understands the basics to the same level that Dukas understand the basics then they are undeniably the same person because no one knew the basics quite like Dukas
Guys, who is Dukas?
  • #17
  • May 30, 2019 7:01pm May 30, 2019 7:01pm
Quoting Lk009
{quote} Guys, who is Dukas?
Someone who used to love arguing with people and telling them how stupid they all were.
  • #18
  • May 31, 2019 2:28am May 31, 2019 2:28am
Quoting BubaYaga
{quote} Someone who used to love arguing with people and telling them how stupid they all were.
  • #19
  • May 31, 2019 2:34am May 31, 2019 2:34am
In my opinion, the biggest problems arise from the trader who is chasing super profits, and as a result comes to the same rake in the grass.
Another day, another candle.
  • #20
  • May 31, 2019 3:02am May 31, 2019 3:02am
Quoting DanielMT4
In my opinion, the biggest problems arise from the trader who is chasing super profits, and as a result comes to the same rake in the grass.
Actualy yes, but this problem depends on Trader.

trading cost depends on Broker
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