EthereumFormazione
Impact of Trading Costs on 2% Max Risk
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Recap: Price is still within Decision 1 and 2. The analysis side of this post is of what is happening in that area and how minor levels are being formed. Money Man hopes that it is self-explanatory, especially to those who follow his normal analyses. But he also wants to elaborate on the previous “2% Max Loss” ed post. It is linked below and built on other ed posts linked there. Disclaimer – You should let your own mind work through this if you take your money seriously.
This is not to be used as a quick reference but is a rough illustration as to effects – something for you to mull over if you have not already. Money Man sat down and drew a rough graph comparing trading costs of 0% (in green), 0.5% (say 0.25% to open trade and 0.25% to close it again) (in orange) and 1% (in red) total trading costs (what the exchange charges / spread). Basically, putting trading costs on top of a 2% Max Loss graph.
If you are to follow the 2% Max Loss route, or whichever percentage, then what would strike you is how the effect of % trade costs grow with trade size and affects it. It sounds obvious and why write a post about it? Again, Money Man’s aim is to illustrate how awareness can temper decisions.
A quick conclusion would be how the possible negative effects of short term (overtrading) with big size, even with 2% risk management, gets amplified by trading costs. Also, how costs hamper the amount you can risk and how it thus then hamper your possible gains beyond simply an upfront cost, but in a risk management environment, what you ultimately can risk.
Various exchanges have various cost structures, and many hit the small volume trader much harder than the big volume traders – they want the liquidity and market makers. The structure is normally stepped and the change from one costing level to another is high.
Conclusion: Do not be confused by all this. Simply follow your risk plan. Consider that say 2% risk on every trade is not the same as 2% for the week, etc and decide if you want to build the costs into your trading before you make a trade. The saying that comes to mind is: “If you are not calculating the costs of your trading; somebody else is”. Remember: No guarantees, only probabilities. Very Important to me: Please like if you appreciate the effort, Please comment and develop this further and Please follow if you see this analysis thread going somewhere you would like to know about.
This is not to be used as a quick reference but is a rough illustration as to effects – something for you to mull over if you have not already. Money Man sat down and drew a rough graph comparing trading costs of 0% (in green), 0.5% (say 0.25% to open trade and 0.25% to close it again) (in orange) and 1% (in red) total trading costs (what the exchange charges / spread). Basically, putting trading costs on top of a 2% Max Loss graph.
If you are to follow the 2% Max Loss route, or whichever percentage, then what would strike you is how the effect of % trade costs grow with trade size and affects it. It sounds obvious and why write a post about it? Again, Money Man’s aim is to illustrate how awareness can temper decisions.
A quick conclusion would be how the possible negative effects of short term (overtrading) with big size, even with 2% risk management, gets amplified by trading costs. Also, how costs hamper the amount you can risk and how it thus then hamper your possible gains beyond simply an upfront cost, but in a risk management environment, what you ultimately can risk.
Various exchanges have various cost structures, and many hit the small volume trader much harder than the big volume traders – they want the liquidity and market makers. The structure is normally stepped and the change from one costing level to another is high.
Conclusion: Do not be confused by all this. Simply follow your risk plan. Consider that say 2% risk on every trade is not the same as 2% for the week, etc and decide if you want to build the costs into your trading before you make a trade. The saying that comes to mind is: “If you are not calculating the costs of your trading; somebody else is”. Remember: No guarantees, only probabilities. Very Important to me: Please like if you appreciate the effort, Please comment and develop this further and Please follow if you see this analysis thread going somewhere you would like to know about.
Nota
2% Max Loss post 
Nota
Current ETH analysis this analysis is within 
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