Transaction costs
Transaction costs are everything a trade pays to be executed: exchange and clearing fees, broker commission, platform or data charges attributable to trading, and slippage. In a backtest they are the explicit deductions that separate a rule's gross result from what an account would have kept.
Senzoukria · Glossary · Updated September 2026
Components of a round trip
The fixed items are known in advance from the broker's schedule and are usually quoted per side or per round trip. Slippage is the only component that must be estimated. Data and platform subscriptions are not per-trade costs, but a strategy that trades rarely carries a larger share of them per trade.
| Item | Charged by | Nature |
|---|---|---|
| Exchange fee | The exchange | Fixed per contract per side |
| Clearing and NFA fees | Clearing house, regulator | Fixed per contract per side |
| Broker commission | The broker | Fixed per contract, varies by broker and volume |
| Slippage | The market | Variable, in ticks, worst in fast conditions |
| Market data and platform | Data vendor, platform | Fixed per month, spread across trades |
Why costs decide the verdict
A strategy's gross expectancy is the average result per trade before costs. Its net expectancy is that figure minus the round-trip cost. When the gross expectancy is a small number of ticks, as it often is for high-frequency intraday rules, the cost can be larger than the edge and the sign flips. The number of trades multiplies the effect: a rule that trades many times a day pays the cost many times a day. This is why a backtest without costs is not a neutral simplification but a systematic bias in favour of active strategies.
- Compare gross expectancy in ticks with the round-trip cost in ticks before anything else.
- Costs shift the equity curve down at every trade, lengthening every underwater period.
- Trading fewer, larger-expectancy trades is a cost decision as much as a strategy decision.
In Senzoukria
The backtest panel's "Transaction costs" block takes the "Point value ($)" of the contract, a "Round-trip fee per contract ($)" and "Slippage (ticks)". Fees are applied to every trade and slippage penalises the entry; the hint warns that zero costs turn a losing strategy into a winning one as soon as it trades often. The journal's "Previous sessions" note states that no commission is deducted there because the simulated account applies none. Market data itself is billed by the data provider, not by the software, so the subscription line of the cost table is external to both panels.
Common mistakes
- Entering a per-side fee where a round-trip fee is expected, halving the cost.
- Forgetting the point value: fees in dollars and results in points cannot be added.
- Testing with one broker's fee schedule and trading with another's.
- Ignoring data subscriptions when comparing a strategy that trades once a week with one that trades hourly.
Related
- Slippage
- Futures backtesting guide
- How to test a trading strategy
- Prop firm rules and orderflow software
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Frequently asked questions
- Should a backtest use per-side or round-trip fees?
- Either, as long as the convention matches the input. Senzoukria's backtest panel asks for a round-trip fee per contract, so a broker's per-side figure must be doubled before entry. Slippage is entered separately in ticks and converted through the point value.
- Are transaction costs the same on a prop firm evaluation account?
- Not necessarily. Evaluation accounts often carry their own commission schedule and platform fees, and some firms charge differently in the funded phase. The fee entered in the backtest should match the account the strategy will actually run on, and the journal's prop firm simulation does not add commissions on its own.