There is a definite cost of trading. The market maker has to get his edge. Your broker has to get her cost. And your profit is what remains, if anything, when these costs are deducted.
The cost per trade is really a part of the expectancy equation, but it is so important that I wanted to add a little more about cost reduction. The fewer trades you make, the less the cost per trade becomes a factor. Many long-term trend followers spend little time thinking about their trading cost. because it is so insignificant compared with the potential profit to be made. For example, if you are thinking about making $5,000 per trade, then you probably are not paying much attention to trade costs of $100.
However, if you are short term in your orientation and make lots of trades, then trade cost is a lot bigger consideration for you– at least it should be. For example, if your average profit per trade was $50, then you would pay much more attention to a $100 trading cost.
– Alexander Elder, Trading for a Living
