Dissecting the many Transaction cost

Trading Discussion Risk Management Practices
1

After
After blowing 2 accounts I am rightfully obsessed with risk management especially after realizing how not accounting and even understand all the many transaction cost that play a role in slowly assassinating one’s account.

The topic I would like to dissect at the moment is understanding Transaction costs related to Leverage.

Question 1:
Which leverage is used to calculate my leverage-related transaction costs?
a)Leverage I opted to use when selecting the amount of leverage I would like to use?
b)True Leverage which is the notional value(the number of actual units traded) divided by the trading accounts balance?

Question 2:
Cost as % of Margin Required is taken as a percentage from my account balance or from the Margin Required?

Thank you in advance.

2

The leverage you use has a direct impact on the transaction costs you pay as a percentage of your trading capital. This means the higher the leverage, the higher will be your transaction costs.

3

I don’t use leverage but there’s a lesson here you might find useful:

4

I understand the concept of what you
are saying, what I have a problem with is how would I calculate the percentage beforehand?

5

Thank you for the lesson.
Though I have to ask you don don’t trade with leverage?! …why is that?
And secondly, margin is related to leverage in my understand what I would like to know since you don’t use leverage is margin taken from your balance? If so how?

6

Welllll technically I still use margin but I typically only have one position open so I always have a good amount of free margin left.

7

You can check this now on your account if you currently have open trades! :slight_smile:

8

Ow I see, makes sense.

9

Again thank you for the heads up :upside_down_face:
Fortunately I know what your talking about

10

And? What did you find? Did you still have a lot of free margin left? :slight_smile:

11

Yeah, I did…it’s a very safe route to use though difficult for me when I sport additionall possible trade setups …

Do you stick to just one trade even when the is A chance to take /start another one?

12

Sometimes I do two trades. That’s probably the max I’ve done! How about you?

13

I see, and still, I say that’s pretty good discipline.

I generally have no min or max, what I focus on is good setups. If it’s good I take it…if the are no potentials I open no trade.
On average I have anywhere between 0-5 open trades.