Commission or spread...

[VingTsunKuen]

Where/how do you "build in" commission or spread that you are paying?
It should be "built in" profit/loss...
I have think about that but i am bit confused...

If i am sizing mine position based on account value,how to add commission in that calculation?

Thanx in advance..
VTK

 

[Rhody Trader]

The easiest way to include the spread into your figuring is to price your buys at the offer and your sells at the bid. If there's huge variance in the spread, though, you'll probably have to come up with some average or normal figure.

 

[VingTsunKuen]

As i am going to trade with MBT i will pay commission.
Could you please be kind to explain how to calculate those business expenses in to profit/loss.

I am using following equitation to determine position size:

Position size=(Account value x Risk in term of %)/Risk in term of USD

So ones when i know position size how to build in commission in to it?
Or should i do it somehow before calculating mine position size?

Regards,
VTK

 

[Rhody Trader]

Add your per unit commission in the "Risk in terms of USD" part of the equation. Though really, unless the commission is large relative to your account value, then it's really not something most traders factor into their position sizing calculations. It is something, however, you do take out of your system testing results.

 

[VingTsunKuen]

Thanx John!
So you say that it is not crucial to calculate commission into position size or other words into profit/loss?
If so,than i will not bother my self whit it.
Usually commission that i "pay"(still on demo) is not larger that 0,0xx% of mine account so i guess i will be fine if i just ignore it.
Cheers!
VTK

 

[Rhody Trader]

So you say that it is not crucial to calculate commission into position size or other words into profit/loss?

No. That's not what I said. I said you can get away with not factoring it into your position sizing calculation, but you absolutely should figure it into your performance figures.

 

[VingTsunKuen]

.... but you absolutely should figure it into your performance figures.

Could you please explain how?

"...figure it into your performance figures.." means in stop loss/profit?
Sorry for bothering you again
Thanx in advance..
VTK

 

[TomTom]

Most good platforms have a commision built in to the system.
All you do is go to tools and in the commission box enter you costs for each exchange, then it will be automaticly put in to the profit and loss figure on the platform.
Try Turbo Trader, very good one click mutiple order system with exelent chart program.

 

[Rhody Trader]

Could you please explain how?

"...figure it into your performance figures.." means in stop loss/profit?

Meaning when you calculate your profits and losses (either for live trading or when running a system test) you should subtract transaction costs.

 

[VingTsunKuen]

Thank you very much John!