Trading Strategy Parameters – Costs

Use the trading strategy parameters costs tab to set up the costs associated with each trade. The costs will be used when calculating your profit during the backtest.

The parameters on this tab may or may not be visible depending upon the currently selected Trading Strategy Wizard Interface Options. Press the Options button to change the Trading Strategy Wizard Interface Options. For more information see Trading Strategy Wizard Interface Options.

  1. Select and enter the Entry commission(s) and Exit commission(s) to use during backtesting:

Per Trade $ – Specifies a fixed dollar commission per trade.

Per Trade % – Specifies a commission based upon a fixed percentage of the total value of each trade.

Per Share/Contract/Unit $ – Specifies a commission based upon a fixed dollar charge per share/contract/unit traded.

Per Share/Contract/Unit ticks/pips – Specifies a commission based upon a fixed number of ticks or pips in the case of FOREX data, for each share/contract/unit traded.

  1. Select and enter the Other costs to use during backtesting:

Margin % per share/contract/unit – Specifies the percentage of the share/contract cost that must be present in the trading account when leveraging your trades. This type of margin is generally used to backtest stock trades on margin.

Margin $ per share/contract/unit – Specifies the number of dollars per share/contract/unit that must be present in the trading account when leveraging your trades. This type of margin is typically used to backtest future trades on margin.

Slippage per share/contract/unit – Specifies the expected difference between the desired execution price for an order and the price at which the order is actually filled. Slippage should be used in a trading strategy if you wish to take into account real world conditions which often cause a difference in price between when you place a trade with your broker and when the trade gets filled on the floor.

When simulating a market order, a trading strategy only uses the next bars opening price and does not take into consideration whether the opening price was at the bid or ask. By setting slippage to the expected average bid ask spread, the entry and exit prices will be adjusted as if the opening price was at the opposite side of the bid ask spread as the entry or exit would occur.

Note that slippage is entered as the number of points you expect the market to move before the order is filled. If you have not selected ‘Point value for futures contracts’, then a one point move is equivalent to a one dollar change in price.

Point value for futures, forex, etc. – Specifies the amount by which the future price is multiplied to determine the dollar value of a contract. Point value should be used in a trading strategy if you want the profit/loss results to reflect the actual dollars you gained/lost instead of the points gained/lost.

Exchange rate for forex crosses, etc. – Specifies the exchange rate ticker symbol used to determine the dollar value of a forex contract.

Exchange rates should be used in a trading strategy to allow the profit/loss results to be calculated in dollars instead of the underlying currency of the forex contract. Additionally, specifying an exchange rate will allow the number of contracts to be traded to be properly calculated when specifying a given dollar amount to trade.

When you are satisfied with the Trading Strategy Parameters press the OK button to return to the Trading Strategy Wizard.

Topic of Interest:
What are Trading Strategies?

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