If you rationalize - hey, I am making profits, who cares if my trading costs are more than 40%. That would be like a pilot with 300 souls on board a flight across the pacific ocean estimating their fuel based on a constant tailwind - when those headwinds show up, and they always do at some point - you crash.
Even though I like much of what you say, your posts in this thread don't really make any sense.
Perhaps the first thing to consider is what type of trader you are. If you're a swing trader, then perhaps your cost percentage can be lower than for a day trader, but when you say that you would stop trading because your costs are above 2% of your profits, this simply makes no sense. Do you skip the next trade because you fear it will be a loss? Not if the signal sets up. Likewise, do you skip the next trade because you don't want to pay the $4?
Lets look at the math of what you say. Assume a $4 round trip in ES. (although I have no idea what you trade) 2% of profit would mean that the $4 commissions had to generate a profit of $200, or 4 ES points. This of course doesn't take into account any losses. The trade that is a loser takes profits, and also takes commissions. So if you put on a trade and get 4 points, we can see you pocket $196 and your commissions are just over 2% ($4/$196). But of course on your next trade, which is a loss of lets say one point, you now have $8 commissions, profits of only $142, and now this percentage is 5.6%. I would say that if you banged out trades all day in a 50/50 mix of 4 point wins and 1 point losers, you'd be a stellar trader, rich beyond our wildest imagination.
So the only way to arrive at a 2% commission using the above example is to have a very high win rate, along with a profit target that is much bigger than 4 points. If your target is 10 points, now the $496 profit has the commission percentage of 0.8%, and your losing trade, if also tiny, can keep this under 2%, but this would be in the realm of impossibility for a day trader.
These numbers therefore can perhaps only work for swing trading, where your target is 20,30,50 points, and you're only trading once or twice a week, if that. I'm certainly not going to work out the math on this, and the win rate would still have to be high with a tight stop, but this 2% thing is just silly.
Commissions are a factor, but they simply are not the reason why a trader is making money or not. I would be ecstatic to have a system with even 25% commissions from my profits. Its so easy to scale up trading when you know your system and have evolved past psych issues.
Speedo says it well when he says his costs are about 11-12%. Even this has room for making it worse while still maintaining nice profitability.
What kills a trader is large losses not in line with average profits, but not commissions. Perhaps you can share more of your stats because claiming 2% as your upper limit is, I'm sorry to say, bullshit. I cannot believe for one second that you'd stop trading even if it hit 5%.
