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Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,049 since Dec 2013
Thanks Given: 4,386
Thanks Received: 10,207
Agree completely. I perform that calculation annually but also add in cost of hosting, cost of hardware (assume 3 years), connectivity costs (3 internet connections) and of course the seat lease cost. When you start doing multi-leg trades a few cents here and there can greatly effect the profitability of the trade, so you really need to know your cost structure.
Back when I was working for large energy traders I was amazed how little people understood their true cost structure. All the companies I ever worked for all cleared through banks that also financed them, and were paying rates a lot higher than you might imagine. I would see other traders do trades that on paper made money but in reality when including brokerage lost money. (Often there was additional OTC brokerage involved). Physical trading is even worse. You need a lot more support staff, schedulers, have liquidated damages risk, etc etc which all have a significant cost, but people still flip stuff back and forth for virtually nothing thinking they are making money.
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,049 since Dec 2013
Thanks Given: 4,386
Thanks Received: 10,207
Commissions year to date for me are 15.1% - this is just exchange fees + clearing fees. Doesn't includes seat lease, software costs, hosting etc.
I'm a (very) active trader as well.
I know my style of trading is very different to yours @Big Mike and different to most people here though.
Lesson here: Different trading styles have different risks, rewards, and cost structures.
Of course! Each methodology is an "industry" with different cost and profit margins. Scalpers with small accounts, tend to over-trade, so if cost and latency is not compatible, it is hard to come ahead positive. But as you said above and pointed very nicely, every method has it's own consideration.
Thanks,
Matt
There is a risk of loss in futures trading.
Trading futures and options involves substantial risk of loss and is not suitable for all investors. Past performance is not necessarily indicative of future results. You may lose more than your initial investment. All posts are opinions and do not claim to be facts. Please conduct your own due diligence. Use only Risk capital when trading Futures.
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Absolutely agree. I only chimed in because he was specifically asking, and the thread was focused on the "struggle" of paying 50% commission due to his trading style.
Thanks SMJCB and Mike exactly the kind of answer I was looking for.
I will check your blog also.
I find My only good scalping time comes when major volume enters.
I am trying to reduce my trades but the Problem is the way I try to position trade involves scalping and being fast as I try to enter on extremes.
For example If i try to buy near the LOD hoping for 50 ticks I hacve to be fast on the button to get out if it moves against me.
If I take 8 attempts at this losing on average 2 ticks a time then on the 9th attempt I make my 40 ticks I have made:
40ticks = $400 Minus
8 X 2 ticks - $160 = $240 Minus
9 X $4.40 RT - $40ish = $200
So you can see how I can end up scalping without the intention to do so and how the commish can addup.
Based on your description above I wouldn't say that you're scalping. You're just trying for positions with a very high ratio of reward to risk which, naturally, will mean you get stopped out a lot but can still be net profitable.
The question I think that you need to ask before you go to the trouble of trying to reduce your commissions is whether the 2 tick stop entries are actually improving your performance.
One useful way to think about this might be to regard this as a synthesis of two different strategies . . .
Firstly, you have some kind of mean reversion strategy with a 50 tick risk:reward (which I'm going to refer to as a higher timeframe signal, whether or not the analysis is actually done in any higher timeframe).
And secondly you have some kind of "scalping" signal that you're using in a lower timeframe. You're trying to use the latter to refine your entries and manage risk for the former.
For this to work well, your second ("scalping")strategy would typically need to have an edge in its own right.
If the higher timeframe strategy is profitable at an R:R of 50:50 and the lower timeframe is profitable with an R:R of 2:2 then the lower timeframe might help you to improve performance for your higher timeframe trades.
Here's an example of how this can work:
On a daily chart, in an uptrend, you plan to buy a pullback of 1%. You know that doing so historically would have proved profitable with a $500 stop and a $500 profit target.
You know that in an uptrend intraday on a 5 minute chart, buying a pullback that causes a 5 period CCI to cross below -100 has been a profitable strategy with a $50 stop and a $50 profit target.
You could then try to combine the two - when the market meets your 1% pullback criteria on the daily chart you start looking for intraday entries with the CCI pullback. You'd have a $50 stop and a $500 profit target. You'd get stopped out a lot, but your refined intraday entry should (before commissions) improve your performance. You'd potentially get the best of both worlds: the profits from the large swings that Mike mentions, but the risk management that daytraders enjoy.
So, I would investigate whether your intraday 2 tick stop entries are helping to improve the profitability and reduce the risk for your 50 tick profit targets before you chase brokers to negotiate lower commissions.
