Figuring spread and commission into Position Sizing

  1. From your personal experience is the value of adding the spread and commission into each forex trade Position Sizing of a great enough of value to pursue doing it.

  2. And if so I assume to do it you can estimate a figure of the total dollar amount of the spread and also the commission for each trade and subtract that total dollar figure from the risk amount for that trade and than use that end figure as your total risk for the trade, meaning if you have 15,000 account and want to risk 1% on each trade you would subtract for example, 10.00, if the spread and commission equal 10.00, from the 150.00 1% risk amount and use 140.00 to use as the final risk amount for Position Sizing on the trade.

Or if there is a better way am open to your input.
Thanx,
Steve

Wouldn’t you add the commission and the spread to get a total amount risked for the trade, so if you wanted a position size of $150 you’ll add the value of the commission and spread to get a total amount risked for the trade, in this case $160 and use that to determine how many units or lots you’ll need to buy?

This was a way I read about from someone who Position Sizes. Am open to other ideas on which might be the best way of doing it. Thanx for your input, much appreciated.

                                                                                Steve

I believe the end goal is to figure the spread and commission as part of the loss if your initial stop loss is hit. The initial stop loss figured from the entry price to your intial stop loss exit price, which is what your position size is figured from. So if your entry to intial stop is 80 pips and your spread is 5 pips than add the 5 pip spread to the 80 pips giving you a 85 pip figure plus an added maybe 2 pips commission to it for example, for 87 pips to position size from.?
Steve

This how i calculate my position sizes i add the spread to the pip amount i’m risking. That way i know the total amount that im risking

This is how I have it done in Excel. I add the spread to the total pips that is between the entry price and intial stop loss exit price and than figure the position sizing from that total pip amount.

Saw this other way of it being done and wanted some inputs on it. So I guess I must be doing it right…
Steve

If you are setting your position size based on where you will exit the trade (as you should be) then the spread is already factored into the calculation. If you have to pay commissions on your trade, then you should indeed put that into the mix by subtracting the commission from the $$ amount you are planning to risk.

For example, if you have a $10 commission and plan to risk $500 on a trade, then you would figure your position size based on $490.

i always thought of it as a total transaction cost, therefore factoring it in my calculation of position size was a must, in case the trade went against me and i’d end losing more than the percentage risked on the trade. Is this right ? i’m a bit confused :slight_smile: