Cost per Roundtrip

Quick question: in what format do we do the cost per rountrip?  For example, one broker’s comission is $3 per 100,000 shares.  So what do I put in this box? $6? 

Thanks.

-Stearno

Figure out the broker’s average spread + commissions (if they have any) then go slightly higher for robustness.

Example:

EURUSD average spread = 1pip
Commission= 5$ per lot.

So commission basically equals 0.5pip.

Total is 1.5pip spread.

Make round trip cost 2.5pips for robustness accounting for slippage and unknown variables, perhaps bad data and over optimization. Always assume the cost will be slightly higher than in live trading when backtesting so you can be sure your system and results are more robust.

Hope this helps, from a forex perspective.

Thanks, I will try that.

Few clarification: why include the spread in the cost per round trip when there is an input for the spread?  Why not only include commissions (+the buffer costs you refer to) in the roudtrip figure and then put the spread in the spread value?

-Stearno

Either way works, the costs will be the same. For forex I just build it all into the spread, which I make extra wide because I trade variable spreads and count for slippage.

Thanks Threshold for clearingh that up.