When many people calculate the profit-loss ratio, they only calculate \"how much they make and how much they lose\", but forget to include spreads, handling fees, and slippage. The result is: The profit-loss ratio is very beautiful in theory, but in real terms it always falls just short of the target. Cost is more than just a post-trade bill, it directly changes the math of deal design. This article talks about how costs enter into the profit-loss ratio and stop-loss design.<\/p>\n
Cost eats up a portion of profit first<\/strong><\/p>\n Suppose you open a long position at a certain price, and the spread has already put you in a small floating loss state from the purchase price. In other words, the market must first go through this cost before you can be considered as \"recovering\". If the target position is set at a position where the cost is just enough to cover it, and the market fluctuates slightly, you will be blocked by the cost. Deduct the cost from the target first, and the profit-loss ratio will be real.<\/p>\n The profit-loss ratio should be calculated \"after costs\"<\/strong><\/p>\n The theoretical profit and loss ratio is the target distance divided by the stop loss distance, but the actual profit and loss ratio should be (target distance minus cost) divided by (stop loss distance plus cost). The closer the cost is to the stop-loss distance, the more the actual profit-loss ratio is compressed. For those ultra-short-term orders with a very close stop loss, the cost can often push the seemingly good profit-loss ratio to barely pass. Calculating this amount before placing an order is much more useful than reviewing it afterward. Use a small table to list the target distance, stop loss distance, and estimated cost. The actual profit and loss ratio can be seen immediately. This step only takes a minute or two, but it can filter out many uneconomical orders.<\/p>\n Stop loss design should leave room for costs<\/strong><\/p>\n Two common mistakes: one is to set the stop loss at a position \"just swept away by the cost\". The market will be knocked off by the cost slippage before the market reaches your judgment point; the other is to ignore the slippage and set the stop loss too tight. A reasonable approach is to leave a small buffer for cost and slippage in addition to analyzing the stop loss distance to avoid \"looking in the right direction but being shaken out by the cost.\"<\/p>\n Cost determines whether the goal is achieved<\/strong><\/p>\n If the target is only a little higher than the cost, the expectations of this transaction are very thin. The criterion for judgment can be used in reverse: after adding the expected cost, can the target level really be reached within the normal fluctuation range? If the market does not reach that position in a normal day, the goal is wishful thinking. Cost is not something to be considered only after the transaction is completed, but a question that needs to be answered during the design phase.<\/p>\n Write costs into trading plan<\/strong><\/p>\n Mature traders will write an extra line in their trading plan: estimated cost. Before opening a position, write down clearly the spread, handling fee, whether to charge overnight, and how much to reserve for slippage, and then look back to see if the profit-loss ratio is still valid. If there is more of this line in the plan, many orders that \"seem to be profitable\" will be screened out in advance. After a period of time, you will find that you have less hesitation before placing an order, because the numbers have already done the preliminary screening for you.<\/p>\n Take WMAX as an example: Make cost-effective design feasible<\/strong><\/p>\n Putting costs and transaction design on the platform, WMAX provides corresponding conveniences: visible spread and fee information before opening a position, allowing for a basis for estimated costs; preset stop-loss and take-profit orders can directly set the \"target after cost\" and \"stop loss with buffer\" into the system to avoid changing orders on the spot; the simulation account is suitable for repeatedly measuring the \"profit and loss ratio after cost\" in a stress-free environment, and then bring this habit into real trading. It should be noted that the responsibility for cost calculation lies with traders, and the platform only makes the numbers clearer. Whether WMAX is right for you depends on whether you are willing to factor costs into the design of each transaction.<\/p>\n write at the end<\/strong><\/p>\n Costs are not bills that appear only at the end of a trade, but rather variables that rewrite the math of profit and loss from the moment a position is opened. Deduct it from the target first, leave a buffer for the stop loss, check whether the target is within reach, and write it into the trading plan. Only by completing these four steps can the trading design withstand the actual test. Regardless of whether you choose WMAX or other platforms, it is recommended to calculate the costs before opening a position and always control the risk within an acceptable range. Leveraged trading carries high risks. Please fully understand the relevant rules before entering the market and make prudent decisions.<\/p>","protected":false},"excerpt":{"rendered":" When calculating the profit and loss ratio, many people only calculate how much they make and how much they lose, but forget to take into account spreads, handling fees and slippage. As a result, the theoretical profit and loss ratio is always a bit worse than the actual profit and loss ratio. This article explains how to deduct the cost from the target profit first, recalculate the actual profit-loss ratio according to the post-cost formula, leave cost and slippage buffers for stop loss, test whether the target level is really achieved, and write the estimated cost into the trading plan so that the trading design can withstand the actual test.<\/p>","protected":false},"author":1,"featured_media":11421,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"om_disable_all_campaigns":false,"_monsterinsights_skip_tracking":false,"footnotes":""},"categories":[122],"tags":[284,1756,636],"class_list":["post-11420","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-tutorial","tag-284","tag-1756","tag-636"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.kpai1.cn\/en\/wp-json\/wp\/v2\/posts\/11420","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.kpai1.cn\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.kpai1.cn\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.kpai1.cn\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.kpai1.cn\/en\/wp-json\/wp\/v2\/comments?post=11420"}],"version-history":[{"count":1,"href":"https:\/\/www.kpai1.cn\/en\/wp-json\/wp\/v2\/posts\/11420\/revisions"}],"predecessor-version":[{"id":11422,"href":"https:\/\/www.kpai1.cn\/en\/wp-json\/wp\/v2\/posts\/11420\/revisions\/11422"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.kpai1.cn\/en\/wp-json\/wp\/v2\/media\/11421"}],"wp:attachment":[{"href":"https:\/\/www.kpai1.cn\/en\/wp-json\/wp\/v2\/media?parent=11420"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.kpai1.cn\/en\/wp-json\/wp\/v2\/categories?post=11420"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.kpai1.cn\/en\/wp-json\/wp\/v2\/tags?post=11420"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}