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Are trading costs the main reason of losses in trading?

  • #61
  • Jul 2, 2019 1:53am Jul 2, 2019 1:53am
Quoting landorra
{quote} Because profit must be considered on a consistent long term basis, never on low spreads.
agreed, but long term profit depends a bit on trading cost))
  • #62
  • Jul 2, 2019 1:56am Jul 2, 2019 1:56am
Quoting GEfx
{quote} The premise of this thread is that trading costs are the reason for trading losses. I think it's clear that this is a false claim. As far as trading efficiency, if a 2 pip spread going into and out of a position impacts your trading efficiency, you trade very differently from me. I reach for no less than 50 pips per trade. That's 50 pips for me, and 4 for the broker (2 going in and 2 coming out). If someone requires 25 trades to capture the same 50 pips, then that's 50 for them 100 for the broker (25 trades time 2 pips to enter and 2 pips...
you are lucky men))
  • #63
  • Jul 2, 2019 4:07am Jul 2, 2019 4:07am
Quoting GEfx
{quote} The premise of this thread is that trading costs are the reason for trading losses. I think it's clear that this is a false claim. As far as trading efficiency, if a 2 pip spread going into and out of a position impacts your trading efficiency, you trade very differently from me. I reach for no less than 50 pips per trade. That's 50 pips for me, and 4 for the broker (2 going in and 2 coming out). If someone requires 25 trades to capture the same 50 pips, then that's 50 for them 100 for the broker (25 trades time 2 pips to enter and 2 pips...
you don't pay the spread twice. You pay it when offer gets triggered (opening a position if buying, closing a position if selling).
  • #64
  • Jul 2, 2019 4:09am Jul 2, 2019 4:09am
Quoting KoiFish
{quote} you don't pay the spread twice. You pay it when offer gets triggered (opening a position if buying, closing a position if selling).
exactly
spread+commision round trip+slippage on opening+slippage on closing
  • #65
  • Jul 2, 2019 6:38am Jul 2, 2019 6:38am
Quoting KoiFish
{quote} you don't pay the spread twice. You pay it when offer gets triggered (opening a position if buying, closing a position if selling).
You must not be paying attention. If your broker has a 2 pip spread, you pay that spread when you enter the trade, and you pay the spread when you exit your trade. Your entry is a trade, Your exit is another trade. The GA right now is (bid/ask) 1.8053/1.8057. You buy at 1.8057. You are down/pay 4 pips. Later, your position is 1.8125. You decide to close the position. To close that buy position, you actually are selling a position. The spread at that time will likely be something like (bid/ask) 1.8125/1.8129. You close/sell, get 1.8125, and the broker keeps the other 4 pips. You just paid the spread again.
  • #66
  • Jul 2, 2019 9:32am Jul 2, 2019 9:32am
Quoting GEfx
{quote} You must not be paying attention. If your broker has a 2 pip spread, you pay that spread when you enter the trade, and you pay the spread when you exit your trade. Your entry is a trade, Your exit is another trade. The GA right now is (bid/ask) 1.8053/1.8057. You buy at 1.8057. You are down/pay 4 pips. Later, your position is 1.8125. You decide to close the position. To close that buy position, you actually are selling a position. The spread at that time will likely be something like (bid/ask) 1.8125/1.8129. You close/sell, get 1.8125, and...
Opening and closing a position consists of two trades, but that dose not mean you pay the spread twice. The offer (buy side) is the floating side.
  • #67
  • Jul 2, 2019 5:12pm Jul 2, 2019 5:12pm
Quoting GEfx
{quote} i dont have time to hash this out with you. to answer the question asked in the title of this thread; no, and thinking this is stupid. On the topuc of trade efficiency, costs only matter if you enter a lot of trades to capture the territory that should take a single trade. And yes you pay the spread taking the trade and exiting the trade. If you dont get that then you are a broker's dream client. Good trading everyone.
Wrong, you only pay the spread once.
Have you ever heard of traders earning the spread? This is basically what HF algos do all day on the futures market. They place and pull orders constantly, not to get orders filled, but to gain optimal book placement so they can earn the spread.
Do trading costs matter? Of course they matter. If you run any business, are you going to keep track of your overheads and keep them as low as possible.
It is a little disturbing that a so called "high impact" poster fails to comprehend basic market mechanics. But I guess that sums up Forex factory pretty well with the blind leading the blind.
  • #68
  • Jul 2, 2019 7:04pm Jul 2, 2019 7:04pm
Yeah, those impact badge things don't mean much as GEfx has shown by making a clown of himself.
GEfx, it has still been less than 24 hours mate, you still have time to delete those posts
  • #69
  • Jul 5, 2019 11:43am Jul 5, 2019 11:43am
Quoting KoiFish
{quote} Wrong, you only pay the spread once. Have you ever heard of traders earning the spread? This is basically what HF algos do all day on the futures market. They place and pull orders constantly, not to get orders filled, but to gain optimal book placement so they can earn the spread. Do trading costs matter? Of course they matter. If you run any business, are you going to keep track of your overheads and keep them as low as possible. It is a little disturbing that a so called "high impact" poster fails to comprehend basic market mechanics....
From my trading today: I entered a trade on the G$ at 1.2522, with a spread of approximately 2 pips. When PA hit 1.2485, I moved my stop to 1.2492. PA moved to 1.2492, at which point my broker executed a buy order at 1.2492, which is what happens when a stop is hit, which cost me 2 pips. Hope that clears it up for you and BubaYaga. And regarding your smart ass derisive comments, go fuck yourself. Both of you.
  • #70
  • Jul 5, 2019 11:53am Jul 5, 2019 11:53am
Quoting GEfx
{quote} From my trading today: I entered a trade on the G$ at 1.2522, with a spread of approximately 2 pips. When PA hit 1.2485, I moved my stop to 1.2492. PA moved to 1.2492, at which point my broker executed a buy order at 1.2492, which is what happens when a stop is hit, which cost me 2 pips. Hope that clears it up for you and BubaYaga. And regarding your smart ass derisive comments, go fuck yourself. Both of you.

Bro, i am having a great week so i am gonna share you a link, it's really basic forex 101 that you only pay spread once. Seriously, paying twice is the first time i heard it and coming from a red badge member. yea totally agree on the blind leading blind here.

https://www.babypips.com/learn/forex...-forex-trading

I think i understand where you are coming from if you are only trading the larger timeframe as you won't notice the small difference of the spread. Using G$ as an example is really bad, try to think using the euro where spread is only 0.0 or 0.1 spread.

Oh, i didnt notice that, if euro is 0.0 spread now, is it like 0 x 2 times = 0? oh actually i am drunk, yea you paid zero spreads. forigve me.
  • #71
  • Jul 5, 2019 12:34pm Jul 5, 2019 12:34pm
Quoting CrocodileRex
{quote} Bro, i am having a great week so i am gonna share you a link, it's really basic forex 101 that you only pay spread once. Seriously, paying twice is the first time i heard it and coming from a red badge member. yea totally agree on the blind leading blind here. https://www.babypips.com/learn/forex...-forex-trading I think i understand where you are coming from if you are only trading the larger timeframe as you won't notice the small difference of the spread. Using G$ as an example is really bad, try to think using...
Thanks, but I am correct. I trade with stops. I don't sit at my trading station waiting to click out, nor do I use limits. If I did either of those things, then you would be correct. But I don't. Relative to either of those approached, if you use stops, you pay twice. I suppose we could spiral into one of those "why use stops" discussions, but that would bore me even more. I don't use limits because they limit the upside. I don't sit at my station waiting for magic to happen and praying that PA hits a puny pip target. I have a software tool that lets me set up the trade, as I planned it out prior to taking the trade, which is what happened today on the G$. When PA hit 1.2485, my stop was moved to 1.2492. When that price level was hit during a retrace, I basically left 2 pips on the table (this is something everyone who wants to make a living trading should/better think about). I got 30 pips net of the 2 on entry and the 2 left behind. I can't make it any simpler than that. This approach is just part of my system and quite frankly, it's the most I've thought about trade costs in about 10 years. As for time frames, I trade the 1H/4H charts, with entry on the 10M chart. I typically have an initial target of 50 to 60 pips, often with immediate targets in the 30 to 40 pip range, as with the G$ today. I guess a summary of this is: if you are reaching for short targets or have time to kill, you can trade with a 2 pip spread. If you are trading for something more, it'll cost you an extra few pips, but the return is well worth it. FYI -- I trade with a group of professional traders that trade exactly like I've described. None of them click out to save on the second spread when the trade is in profit. Limit orders are infrequently used (I haven't used on in 10 years). We all use the tool I mentioned, and we all use stop placement as trades unfold. Thanks for your reply and good trading to you.
  • #72
  • Jul 8, 2019 7:22pm Jul 8, 2019 7:22pm
Quoting GEfx
{quote} You must not be paying attention. If your broker has a 2 pip spread, you pay that spread when you enter the trade, and you pay the spread when you exit your trade. Your entry is a trade, Your exit is another trade. The GA right now is (bid/ask) 1.8053/1.8057. You buy at 1.8057. You are down/pay 4 pips. Later, your position is 1.8125. You decide to close the position. To close that buy position, you actually are selling a position. The spread at that time will likely be something like (bid/ask) 1.8125/1.8129. You close/sell, get 1.8125, and...
Ok, let's price is 1.8053/1.8057.
If you buy at 1.8057 and immidiately close position at 1.8053, where is second spread you're talking about?

Actually, we don't "pay the spread", even one. We just can't close position at the same price we opened it
In this case we should analyze average spread on instrument / average execution spread for order types we use / or average spread during hours we trade. Just to know how much we will pay in average for each deal. Plus commission and slippage, of course.
  • #73
  • Jul 8, 2019 11:16pm Jul 8, 2019 11:16pm
Quoting komposter
{quote} Ok, let's price is 1.8053/1.8057. If you buy at 1.8057 and immidiately close position at 1.8053, where is second spread you're talking about? Actually, we don't "pay the spread", even one. We just can't close position at the same price we opened it In this case we should analyze average spread on instrument / average execution spread for order types we use / or average spread during hours we trade. Just to know how much we will pay in average for each deal. Plus commission and slippage, of course.
I buy at 1.8057 only if there is room for the trade to go 50 or 60 pips. Buying at 1.8057 with a 2 pip spread costs 2 pips. When the trade hits, for example, 1.8117, I move my stop to, say 1.8105, using a software tool that works with my broker station. If PA moves back to my stop, I lose 2 pips relative to just clicking out or setting a limit order. A real life example is with the GA. Last night I bought at 1.7919, with targets at 1.7956, 1.7966, and 1.7986 (if you understand fib levels, that makes sense to you). My trading tool moved my stop to 1.7950 when PA hit 1.7966, and moved the stop again, to 1.7975 when 1.7987 was hit. PA moved back to 1.7975, and my stop was hit, which took me out at the Bid price, not the Ask price (4 pip spread/cost). Had I been here in person to take the trade off, I could have clicked out at the Ask price (zero cost/spread), or if I had used a Limit order, it would have taken the trade out at the Ask price (zero cost/spread). As with many of my trades, I am not around when the stop is hit. As for your example, if you buy at 1.8057 and then close at 1.8053, you've lost 4 pips. You could consider that losing the spread.
  • #74
  • Jul 9, 2019 5:42am Jul 9, 2019 5:42am
Quoting GEfx
{quote} I buy at 1.8057 only if there is room for the trade to go 50 or 60 pips. Buying at 1.8057 with a 2 pip spread costs 2 pips. When the trade hits, for example, 1.8117, I move my stop to, say 1.8105, using a software tool that works with my broker station. If PA moves back to my stop, I lose 2 pips relative to just clicking out or setting a limit order. A real life example is with the GA. Last night I bought at 1.7919, with targets at 1.7956, 1.7966, and 1.7986 (if you understand fib levels, that makes sense to you). My trading tool moved my...
If you enter with spread 2 pips and exit with spread 4 pips, your average execution spread is 3 pips.
If you trade 100 times with such spreads, your avg. exec. spread will be again 3 pips.

So, you know your estimate cost of each trade.
Of course, market can be different, and next trade can be closed with spread 10 or 50 pips on news. But it has not sense to sum up open and close spread to calculate estimates.

Hope, I put it quite clearly.
  • #75
  • Jul 9, 2019 6:04am Jul 9, 2019 6:04am
Quoting komposter
{quote} If you enter with spread 2 pips and exit with spread 4 pips, your average execution spread is 3 pips. If you trade 100 times with such spreads, your avg. exec. spread will be again 3 pips. So, you know your estimate cost of each trade. Of course, market can be different, and next trade can be closed with spread 10 or 50 pips on news. But it has not sense to sum up open and close spread to calculate estimates. Hope, I put it quite clearly.
Traders are worried over things I think it is not important. Just trade profitably first....consistently... for a long period of time.
  • #76
  • Jul 11, 2019 8:03am Jul 11, 2019 8:03am
Quoting Okpala1988
{quote} Traders are worried over things I think it is not important. Just trade profitably first....consistently... for a long period of time.
It can be not so important if your trading has definitely big expectancy.
If no, trading cost will kill everyone.
  • #77
  • Jul 12, 2019 3:13pm Jul 12, 2019 3:13pm
They call us "retail" traders because we do not pay wholesale prices. The spread is the markup from your broker for choosing to use their services. It is the cost of doing business. It is no different than operating a retail store and buying things to sell in it. You buy at wholesale and sell it to people at retail. If this cost disturbs you, then you should probably quit trading. You cannot avoid it even by becoming the broker. If you become a broker, then your trading is heavily regulated and not even worth bothering to do. When I was offered a job on Wall Street, the rules would only allow me to trade my private portfolio one day a month, lol, so of course, when I realized that I declined the offer. That regulation is ridiculous, though I understand why it is in place. But it would require most of my income to be based on commission, not performance, and that was not appealing to me. I would have had to become a salesman, not a trader. So, you are paying for the software, the connectivity to the exchange, the liquidity offered by the broker, the broker's employees, the infrastructure costs, the licensing costs, the banking fees, the accounting fees, and any other associated costs. It is unavoidable, making the topic of this post irrelevant.

When I traded stocks I had to pay a transaction fee of $7 to open a trade, the spread, and another $7 to close the trade. When I traded stock options I had to pay a transaction fee of $12.95 to open a trade, the spread, and another $12.95 to close the trade. In Forex, I pay the spread, and it is normally less than a stock spread. I consider that savings, but again, it is unavoidable. The broker is paid by commission and/or spread. Pay it or quit. It is the same in Las Vegas or anywhere else you can gamble on events outside of trading. You get "points" (spread) and if you win, you generally owe "juice". Are you unaware of how gambling works?

If you want to be profitable, trade time frames that effectively cover the spread consistently and create profit consistently. If you want to trade ticks, like the commodities market, you are in the wrong market. Commodities leverage differently than Forex, so tick volume has more weight. Adapt and overcome, or quit. This is basic rookie material. Perhaps you need to go to babypips and do their Forex education so you can learn how this market works. If you are concerned about slippage, then place pending orders instead of market orders to open and use take profit or trailing stop losses to close. I think that is covered in their tutorial too. Good Luck.
You cannot be extraordinary by being normal
  • #78
  • Jul 12, 2019 5:03pm Jul 12, 2019 5:03pm
Of course, you should pay. But why you should pay more?
You can take coffe for $5 or for $4.5. If you drink it every 5 minutes, you see the difference at the end of day.

This topic is about how to analyze trading costs and how to select broker with low costs.
  • #79
  • Jul 12, 2019 10:00pm Jul 12, 2019 10:00pm
Quoting komposter
{quote} Of course, you should pay. But why you should pay more? You can take coffe for $5 or for $4.5. If you drink it every 5 minutes, you see the difference at the end of day. This topic is about how to analyze trading costs and how to select broker with low costs.
You are correct. It is a free market society. The topic is "Are trading costs the main reason of losses in trading?", not "how to analyze trading costs and how to select broker with low costs". Since broker fees and spreads are inherent to live trading, you have to include those costs in your business plan. Still makes the topic irrelevant. If the spread costs are part of your trading plan, then they would not be causing you to lose.
You cannot be extraordinary by being normal
  • #80
  • Jul 12, 2019 10:27pm Jul 12, 2019 10:27pm
Quoting BubaYaga
{quote} You are still wrong. Whether you trade with stops or not you still only pay the spread once. I am sorry I called you a clown as it is becoming clear you actually have some sort of intellectual disability. And now I feel bad for you.
Different brokers have different ways to charge. Most likely he is on a commission + spread pricing model, in which case you are charged at entry and again at exit.

I trade with a variable spread, which means I am charged half the spread at entry and whatever half the spread is at close. It is just a neat trick to possibly make more money from traders. If the spread widens at the exit, you pay a little more than if it was fixed at the entry. He might be trading like that too.

It would help if you traded live so you can determine if your broker does that type of pricing too, before you start insulting actual traders. Thank you.

Here is a screen shot of spread costs. The top one is exit. The bottom is entry. You can see it is the same trade. The number reflects pips, not monetary costs. Those pips are multiplied by the lot size to determine the monetary value.
Attached Image
You cannot be extraordinary by being normal
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