Guided example · Synthetic cost arithmetic · midpoint and bid/ask alternatives
Count each cost once
Start with a midpoint-based model and build the same complete risk estimate as the guide.
Restart & example assumptions
Authored synthetic observations, shown in sequence. Every comparison uses only the revealed data. This is a worked learning example, not live prices, broker execution or a profitability backtest. Follow the article’s exact definitions; measurements and pattern names alone do not authorize a trade.
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Start with the price source
A midpoint or last-trade simulation does not automatically include buying at an ask and selling at a bid. If your fill model already uses the executable sides, do not add the same spread a second time. Keep commissions and adverse slippage separate from that decision.
A complete arithmetic example
This synthetic midpoint-based example uses a 1-point gross entry-to-stop distance, $1 cash value per point per unit, a 0.10-point round-trip spread allowance, $0.02 round-trip fees per unit and 0.05 points of additional adverse execution allowance.
Estimated risk per unit = (1 + 0.10 + 0.05) × $1 + $0.02 = $1.17
100 units would imply $117 estimated loss at the stop.
For a $100 total budget: floor(100 / 1.17) = 85 units; estimated loss = $99.45.
The budget is an estimate, not a guaranteed maximum. Actual gaps and fills can be worse.
What to ask before comparing a fee schedule
- Is the quoted charge per side, round trip, unit, lot or contract?
- Does it include exchange, clearing or platform charges?
- Which currency is used, and are conversion charges relevant?
- Can overnight financing or borrowing charges apply?
- What quantity, session and liquidity assumptions does the comparison use?
Do not reduce the analysis to “zero commission”
A low visible commission does not establish a low total cost. Equally, a higher headline fee does not alone establish worse execution. Compare documented terms and actual execution records for the same instrument and use case.
A useful review habit
Record gross price result, explicit charges and execution differences separately. Express net result against the original risk denominator. Do not retrospectively shrink the denominator after taking a loss.
Educational cost model, not a broker quote or recommendation. Verify current product terms and contract specifications.