What a trade actually costs
Most strategies that fail in a live account did not stop working. They were never profitable once costs were counted. There are four of them, and only the first is visible on the screen.
1. Spread
The gap between the buy and sell price. You pay it the moment you enter: open a position and it is immediately negative by roughly the spread. On a wide-stop swing trade this is noise. On a ten-point scalp, a two-point spread is 20% of the target before anything happens.
Spreads are not constant. They widen at the daily rollover, around scheduled data, and in thin holiday markets — which is exactly when many short-term systems want to trade.
2. Commission
A flat charge per volume traded, common on raw-spread accounts. It looks cheap per trade and is not: it scales linearly with how often you trade. A hundred round trips a month at a few units of currency each is a real number that must come out of gross profit before anything is left.
3. Swap (overnight financing)
Hold a leveraged position past the daily cutoff and you pay — or receive — financing on the full exposure, not on your margin. It can be positive in your favour, but it is charged on the whole position size, so on a multi-week hold it can quietly exceed the move you were trading for. Wednesday typically carries a triple charge for the weekend.
4. Slippage
The difference between the price you expected and the price you got. It appears at entry with market orders, at exit when stops trigger in fast markets, and at its worst across weekend gaps. Backtests almost never model it honestly, which is why backtested results look smoother than any live account ever does.
Putting a number on it
Work out cost as a share of your average winner. If your typical win is 30 points and round-trip cost is 3 points, you are giving away 10% of every win — and your break-even win rate moves accordingly. If costs exceed roughly a third of the average winner, the strategy is a cost-delivery mechanism for your broker, not an edge.
The same arithmetic explains why frequency is expensive: doubling the number of trades doubles the costs while leaving the edge per trade unchanged.
What to do about it
- Include the full round-trip cost in the position size calculator — it comes out of the same risk budget as the stop.
- Avoid trading in the minutes around scheduled releases unless the strategy is specifically built for it.
- Compare account types honestly: raw spread plus commission versus wider spread with none, at your actual trade size and frequency.
- Check swap before holding anything for weeks. It is published by your broker per instrument.