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Brokerage fees, slippage, and errors are going to be some dollar amount per
trade. You should figure out that dollar amount and then multiply by the
number of shares/contracts you'll do per trade times the number of trades
per year and then divide by your capital to get the transaction cost haircut
in percentage terms.
If you trade very aggressively and use a lot of leverage your transaction
costs will be relatively larger. 250 one lot trades in a year are going to
have a 20x larger percentage transaction cost if you have $5k in capital
compared with $100k.
Aaron Schindler
----- Original Message -----
From: "Marcus Jellinghaus" <Marcus_Jellinghaus@xxxxxx>
To: <omega-list@xxxxxxxxxx>
Sent: Thursday, May 30, 2002 4:21 PM
Subject: Costs of trading
> Hi,
>
> letīs assume that one finds a strategy which makes x % per year. Letīs
> assume that he buys and sells one time every day.
> So one produces some costs, like brokerage fees, some costs if it is not
> possible to buy at the price that the strategy simulation software used in
> backtesting ("slippage") and some costs because of problems and errors
> (trading the wrong quantity or too late, power outage, the datafeed didnīt
> update, ...).
>
> What are realistic costs per week?
> 1% for brokerage fees per week (10 trades)?
> 1% slippage per week (0.1% per trade)?
> 0.3% per week for problems and errors?
>
> Has anybody in this group calculated this numbers?
> Whatīs your opinion?
> How do you lower this costs?
>
>
> Regards,
>
>
> Marcus
>
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