Approximating Commissions as a Percentage

Discussion in 'Risk Management' started by dima777, Aug 5, 2009.

  1. dima777


    I wonder if anyone tried to approximate commissions as a percentage of your trading account when you are trading a basket of the different instruments – stocks, futures and forex. Let’s say that the portfolio risks always 1% of the balance – with perfect distribution of the capital between the underlying instruments – is it possible to arrive at a generalized value of the commissions as a percentage of the total account balance – e.g. 0.1 % per trade on average ?
    Any feedback is greatly appreciated!
  2. 1) Not really. It's an "arbitrary" number.
    2) Shorter-term traders would tend to have a "higher" number.
    3) Longer-term investors would tend to have a "lower" number. :cool:
  3. dima777


    what do you would be a fair number as a percentage of the account balance?
  4. 1) It's arbitrary. There is no specific number nor range of numbers. Your "number" is unique to you, whatever it may be.
    2) It's more important that you are consistently earning money.
    3) Your profitable method is more important than the "cost" of the method. :)
  5. dima777


    A system that I devised - earns a fair amount on lots of kinds of different markets - but still it has lots of even trades which pile up geometrically on a reinvestment basis - so I am looking for a number that I can input into the calculation of the profit profile...Absolutely no suggestion on what could be a nice generalized number? 1/10 of percent??
  6. DrEvil


    I'm not going to explain where I get this from but I would suggest that commissions plus spread on a trade should not be more than 10% of the risk on that trade. Ideally much less than 10%.
  7. ronblack


    No, the function that determines the commission as a percentage of account value is non-deterministic for most systems.
  8. dima777


    Well I need to find the approximate value as I am testing the system on stocks, forex and commodities right at the same time and aggregate the trading results in one profit profile. Of course such a general value would be somewhat different form individual market commissions.
  9. nazzdack already told you twice. You are asking a nebulous question and hoping for a speciifc answer. Scalping - it might be 50%. Longterm hold, it might be 1-2%.

    It depends on the instrument, the hold time, your profitability, etc. etc. If not profitable, it might be over 100% of your cost!!!
  10. Not true...
    If you have slim profit margins, say 10%...
    Your profits will be much more volatile...
    And you will not survive a crisis eventually.

    As a general rule for stock traders...
    If your margins are less than 40-50%...
    You will likely go out of business in the long run.

    If you are paying 1/3 of a cent and cannot make 1/3 of a cent...
    You will not survive and grow.

    Low margin trading requires very expensive infrastructure...
    Which most start-ups and lone day traders do not have.
    #10     Aug 13, 2009