Include the cost of a trade
Keep price changes separate from simulated trading results.
The idea
A favorable price change is not the same as a profitable trade.
A paper test needs assumptions for the prices paid and received, the quantity, and any costs.
A small example
Use these invented numbers for one unit:
| Item | Amount |
|---|---|
| Buy price | 100 |
| Sell price | 101 |
| Entry fee | 0.20 |
| Exit fee | 0.20 |
The price difference is 1. Subtract both fees and the result is 0.60.
This is arithmetic for a hypothetical trade, not a real fee schedule or a measured result.
Try it
Keep the fees, but change the sell price to 100.30. What is the result?
Check your answer
The price difference is 0.30. Subtract 0.40 in fees and the result is −0.10.
Use stated fill prices and costs throughout the test. Do not subtract a spread again if the chosen fill prices already include it.