The outcomes reveal that particularly provided an absolute edge on EUR/USD during test period. Over 366 trades, an overall return of 33.85 units of risk was achieved, giving the normal positive expectancy per trade of 9.25%. This means that the typical trade produced coming back comparable to the exact amount risked with an extra 9.25% of your amount. With the strategy is entirely mechanical, and this it represents just one single instrument within what is traditionally the worst-performing trend-following asset class (currency pairs), that isn’t such an awful result.
However, fees and commissions must be factored in, to determine the return that could actually are actually enjoyed. In the event that:
the trading was done by a fund with EUR/USD futures contracts, and
1 / 4 of your trades must be “rolled over” prior to a contract expired, incurring a different commission, and
a “round trip” commission of $20 per trade needed to be paid, and
an account of $10 million was traded with each unit of risk equaling a small 1% in the starting asset size, then
the entire return would equal $3,385,000 minus 366 trades multiplied by $25 each, representing the commissions. This would mean a reduction of the return by just 0.1%, giving an overall total return of 33.75%. It may be assumed whenever the rolling over strategies were poor, there’d be some additional losses.
Imagine now a retail trader with a merchant account of $10,000 who wants to trade this plan having a retail islamic forex account brokerage. Luckily due to this trader, the brokerage allows having access to a approximation of your futures contract which might be traded that has a minuscule lot size, in addition to really small lot size spot islamic forex account trading, so there is absolutely no downside to scalability.
You need to to work out some likely costs of trading for your retail trader trying to implement this tactic over a similar period to the EUR/USD. To begin with we can look at the cost of utilizing spot islamic forex account:
Each trade incurs a spread of 2.5 pips, and
Each position that is still open with the New York close incurs an overnight swap charge that is different from position to position, but which averages seem to, let’s imagine, three-quarters of any pip per night.
In the interest of simplicity we can perform an uncertain calculation based on pips. The 33.85% return calculation was based upon an income of 9,088 pips. The spread alone is 2.5 pips multiplied because of the 336 trades, that happen to be add up to 840 pips. Next, we will need to deduct the overnight swap free forex account charges. Our retail trader had a position open over 9,889 nights, which might be the cause of 7,417 pips. So we need to deduct an overall total of 8,257 pips from your total profit of 9,088 pips, which leaves a net profit of only 831 pips!