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Profits And Commision?
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Profits And Commision?

  #11 (permalink)
Market Wizard
Houston, TX
 
Futures Experience: Advanced
Platform: XTrader
Broker/Data: Advantage Futures
Favorite Futures: Energy
 
Posts: 2,114 since Dec 2013
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mattz View Post
Cost of platform per month/number of RTs per month) + RT cost as quoted by broker = Total RT cost

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.

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  #12 (permalink)
Market Wizard
Houston, TX
 
Futures Experience: Advanced
Platform: XTrader
Broker/Data: Advantage Futures
Favorite Futures: Energy
 
Posts: 2,114 since Dec 2013
Thanks: 1,744 given, 3,343 received
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Big Mike View Post
Commissions are around 2-5% of my profits. I am an active trader and made over 60k last month, you can see all my stats in my journal.

Lesson here: don't scalp.

Mike

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.

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  #13 (permalink)
Market Wizard
Boca Raton
 
Futures Experience: Advanced
Platform: Variety
Broker/Data: Optimus Futures, LLC
Favorite Futures: Futures
 
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SMCJB View Post
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.

PM with any questions about optimusfutures (800) 771-6748 (561) 367 8686. THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES TRADING.
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  #14 (permalink)
Site Administrator
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SMCJB View Post
Lesson here: Different trading styles have different risks, rewards, and cost structures.

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.

Mike

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  #15 (permalink)
Trading for Fun
LONDON UK
 
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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.

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  #16 (permalink)
Trading Apprentice
London, UK
 
Futures Experience: Master
Platform: Interactive Brokers
Broker/Data: TradeStation
Favorite Futures: Portfolio ETFs
 
Posts: 13 since Jun 2014
Thanks: 5 given, 16 received


xylem View Post
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.

Hello,

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.

Good luck!

Nick

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  #17 (permalink)
Market Wizard
Cleveland, OH
 
Futures Experience: Advanced
Platform: QST
Broker/Data: QST, DeCarley Trading, Gain
Favorite Futures: Options on Futures
 
Posts: 2,727 since Jul 2011
Thanks: 793 given, 4,777 received

For contracts closed in 2015 my commissions and fees are 9.5% of profit.

Commissions and fees are $6.25 per contract.

For contracts closed in 2014 my commissions and fees were 2.6% of profit.

Commissions and fees were $9.82 per contract.

Note: One broker I trade at charges a higher commission but they provide me with my advanced data platform (QST) free.

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  #18 (permalink)
Market Wizard
Cleveland, OH
 
Futures Experience: Advanced
Platform: QST
Broker/Data: QST, DeCarley Trading, Gain
Favorite Futures: Options on Futures
 
Posts: 2,727 since Jul 2011
Thanks: 793 given, 4,777 received


xylem View Post
I can do up to 80 contracts a day at $4.40rt
This amounts to about $350 which is a lot of money.
This could add up to half of my profits maybe more or less pending on how well Ive traded.

50% of profits on commsion is A LOT especially when you have to factor in the scratch days.

If you only make an average of $8.75 per trade, then commissions and fees will always be a higher percent of your profit.

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  #19 (permalink)
Trading Apprentice
Bocas Del Toro, Panama
 
Futures Experience: Intermediate
Platform: NinjaTrader
Favorite Futures: CL & NG
 
Posts: 32 since Sep 2012
Thanks: 44 given, 32 received

My advice : stop scalping & look at the bigger picture!

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  #20 (permalink)
Elite Member
Chicago, Il
 
Futures Experience: Master
Platform: NT, CQG, Bloomberg
Favorite Futures: US
 
Posts: 64 since Apr 2014
Thanks: 11 given, 41 received


Lease a seat and you will be able to get your rates as low as possible.

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