Trading costs
Trading costs are everything a trade costs to make: commission, the spread, slippage, exchange or platform fees, funding on leveraged crypto positions, and tax.
How Trading costs is calculated
Add each piece per trade and multiply by the number of trades. A cost of 10 basis points per side is 20 basis points per round trip. If each trade uses the whole account, a rule that trades 100 times a year gives up about 20 percent of the account to costs before any return. Tickfloor's Lab charges a fixed number of basis points on both legs of every trade.
How it is read
The more often a rule trades, the more its result depends on the cost assumption. A rule that looks fine before costs and poor after costs did not survive them.
Common mistakes
- Leaving costs out because they look small per trade.
- Using a retail broker's headline fee and ignoring the spread.
- Testing at cost levels you cannot actually get.
Test it yourself
Costs are charged per side on every Lab trade and shown on the receipt, so you can see how much of the result they took. The Lab charges trading costs on every trade, fills on the next day's open, and shows how many attempts you have made.
What Tickfloor tested
Tickfloor's research desk has backtested 678 strategies, net of modelled trading costs. After correcting for the 761 tests run, 0 passed. That does not prove no strategy works. These are historical diagnostics, not validation under Testing Standard v2: the backtest harness predates that standard and has not been re-run to meet it.
Lessons that cover it
- Profit and loss (P&L)
- The full cost of a leveraged crypto trade, and the ‘free yield’ trap
- Costs inside a backtest
- The hidden costs: spreads, slippage and fees
Related concepts
General information only. It doesn't consider your objectives, finances or needs. Tickfloor holds no financial services licence and never places trades.