What's your End of Month (Cost/Returns) Ratio ?

[tiddlywinks]

No doubt costs are critical to understand.
But I'll take the other side... a 20% cost means an 80% gross profit margin.
More than a few businesses would kill for that gross profit margin!

And if your trading business is not of the hobbyist-type, costs(expenses) are deductible tax-wise without thresholds.

By all means, do what you can to reduce costs. But if costs alone are the determinant as to whether you are net profitable or not, trading may not be the right vocation to pursue.

 

[globalarbtrader]

No doubt costs are critical to understand.
But I'll take the other side... a 20% cost means an 80% gross profit margin.
More than a few businesses would kill for that gross profit margin!

And if your trading business is not of the hobbyist-type, costs(expenses) are deductible tax-wise without thresholds.

By all means, do what you can to reduce costs. But if costs alone are the determinant as to whether you are net profitable or not, trading may not be the right vocation to pursue.

It depends entirely on the strategy and the holding period.

For someone trading pretty slowly like me costs are basically a minor annoyance. My costs could increase by a factor of 10 and I'd be unhappy, but I'd still be profitable (just).

However for HFT traders a tiny increase in costs would make their strategy unprofitable. Costs alone determine whether they are profitable.

The OP stands somewhere between these two extremes.

GAT

PS I don't know about the US, but in the UK commissions are tax deductible, but other costs (research, data, ...) are not unless you class your trading income as income rather than capital gains (the former has a higher tax rate, so I prefer to be taxed on capital gains even if it reduces my deductibles - it does mean I am a real penny pincher on these).

 

[Stockmarketmap]

2 factors ( that I have personal preference for and experience with ) that can alleviate the need to keep track of # trades, taxes, special trading platforms, commissions, journalling etc. are:
1) open and fund a ROTH IRA. No tax preparation or consequences ( with exception of energy MLP cap gains ) and the use of a wide range of equity ETF's and products. I have a ROTH satisfactorily with IB for past 10 years and other brokerages for many years previous to that.
2) Migrate to a much lower transaction strategy with long(er) term holding periods, and hence deeper geometric compounding with tax deferral via ROTH. Loosens up mental resources and time for other areas of study / life.

 

[speedo]

Runs about 8% which I will take as an expense for any business.

 

[Handle123]

So many have told me that it is better to use true breakeven stops when day trading and going for plus one tick is foolish, these are same people who don't look at bottom line especially if you paying retail ES that plus $8 bucks is better than negative $4.50 RT, so if you doing ten lots and doing ten trades a day, that one tick comes to $1250.00 turnaround. Now granted most either are making more than a tick on winning trades, but there are days where most of trades are right around where you got in. When you add up the winners, losers, often times without plus one tick, you end up with more losing trades. And if you average 3/4 trades a day where you out at breakeven minus fees, you could have instead $320 more in account on a ten lot.

Most traders also do not take into account lost hourly pay, whatever you were doing before trading would have been a sure thing, so if you were making $20 bucks pus bennies, figure $200 a day and this is undisclosed loss.

Costs so much less trading long term, less trades, usually nailing down huge winners eventually, can use free charting or free data, delayed is fine, can have a real life away from screens. Of course you have to learn to start a hobby.

 

[i am nobody]

yes, this is very true. i've seen traders here playing for ticks on the es...i don't think they have done the maths.

I never calculate my cost.
Cost is 1.15% for this week so far. LT cost is probably less than 5%. All depends of how the markets move. Sometimes big profits per trade (strong trend), sometimes lousy profit per trade (no trend).

 

[speedo]

Handle, I've found that moving stop to BE plus a tick stopped me out of ultimately target hit trades, so depends on trade plan and methodology.

 

[Surprise]

The bid/ask spread is definitely a cost , in fact if there is no spread most traders will break even eventually - not lose - . Its all about the bid ask spread , market makers are in it to collect the bid ask spread they dont know where the market is headed either .