OmniVest User Forums
General Discussion Topics
Effects of Commissions and Account Size
11 replies, 1121 viewings
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OmniVest User Forums
General Discussion Topics
Effects of Commissions and Account Size
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Last Activity 4/15/2019 7:43 PM 11 replies, 1121 viewings |
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Mark Holstius Elite    Posts: 744 Joined: 10/11/2012 Location: Sleepy Hollow, IL  User Profile |
Thanks again for your posts - you've addressed 2 very important questions: 1) The effect of commissions overall (MB vs IB specifically) 2) The effect of commissions on performance when using lower account sizes when a portfolio like mine trades a lot at lower allocations. In my last post I recommended that everyone look at using IB for their commissions and help with the 3 day rule in an IRA - especially with any portfolio that trades a lot using small allocations. I went back to your post on the 8th where your jpg snag showed you were using MB commissions of $6.95 / trade. I then did a few runs using the FTM Rev06 in an IRA (Max % of equity 95%) with MB and IB commission settings. The results (below) are very informative - all using FTM Rev06 for the last 5 years; IRA Using 2% / Trade, $10,000 Equity, and your MB Commission Settings; IRA Using 2% / Trade, $10,000 Equity, and IB Commission Settings; IRA Using 4% / Trade, $10,000 Equity, and your MB Commission Settings; IRA Using 4% / Trade, $10,000 Equity, and IB Commission Settings; There’s really no debate - the commission structure has a serious effect on performance when using FTM Rev06. The performance is quite reasonable in a $10,000 IRA if you use a 4% allocation / trade, so I did another 2 runs in an IRA funded to $20,000… IRA Using 4% / Trade, $20,000 Equity, and your MB Commission Settings; IRA Using 4% / Trade, $20,000 Equity, and IB Commission Settings; Again, it’s obvious that IB is the way to go due to the commissions when using my FTM Rev06. The efficiency and stability of the account also improves with size. Using a portfolio that trades a lot using small trades presents some interesting challenges. I hope these comparisons help to illustrate the effects of commissions and account size when using my FTM Rev06 - and any portfolio that trades a lot. Mark [Edited by Mark Holstius on 7/10/2017 2:01 PM]  Attached file : 02 5 Year MB Commissions Alloc04.png (162KB - 710 downloads) Attached file : 03 5 Year IB Commissions Alloc04.png (117KB - 711 downloads) Attached file : 04 5 Year MB Commissions Alloc04 20K.png (172KB - 668 downloads) Attached file : 05 5 Year IB Commissions Alloc04 20K.png (116KB - 737 downloads) Attached file : 00 5 Year MB Commissions Alloc02.png (161KB - 724 downloads) Attached file : 01 5 Year IB Commissions Alloc02.png (114KB - 685 downloads) | ||
| Steve2 Elite Posts: 750 Joined: 10/11/2012 Location: Annapolis, MD User Profile |
It would be nice if there were some tools to support such analyses (maybe in Omnivesting...). Steve | ||
| Jim Dean Elite  Posts: 1059 Joined: 10/11/2012 Location: L'ville, GA User Profile |
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| Mark Holstius Elite Posts: 744 Joined: 10/11/2012 Location: Sleepy Hollow, IL User Profile |
I hope I didn’t cross over a line in putting up these snags. I meant no disrespect, nor intended to imply what broker anyone should use. That's obviously a personal choice. My only intention was to present the data so that everyone can make informed decisions. This was such an excellent example of 2 of the interactions that can have a big effect on one’s account that I felt it might help. Steve - you’re so right. I guess the best we can do now is just run a few different scenarios on our own. Steve Mayo’s Omnivesting really helps with the comparisons. It’s also helpful that we can experiment with any shared or Elite portfolios in OV with our own settings before deciding whether to subscribe. Jim - so true. I’ll be looking for some good software to do the heavy lifting next spring with all the trades this portfolio takes. At least we avoid that in an IRA... Mark [Edited by Mark Holstius on 7/10/2017 7:55 PM] | ||
| Steve2 Elite Posts: 750 Joined: 10/11/2012 Location: Annapolis, MD User Profile |
If you are trading a mix of taxable and tax-deferred accounts, the IRS requires you to do wash sale analysis across all accounts (even IRAs). I would highly recommend TradeLog (tradelogsoftware.com) for those that prepare their own taxes. TradeLog supports automated import of trade histories from most brokers, enables you to consolidate any number of accounts from any number of brokers into a single TradeLog file for proper wash sale accounting, automatically generates Form 8949 and import the results into common tax preparation software packages like TurboTax and TaxAct. Also, a word on TurboTax for anyone doing lots of trades in larger accounts (>$100K). TurboTax has an field input limit of $9,999,999 (as of a year ago). If you are doing lots of trading then your total Proceeds and Costs that must be entered on Schedule D can easily exceed this limit. TaxAct does not have this limit. Steve | ||
| BrianD Legend Posts: 302 Joined: 2/23/2013 Location: Grand Rapids, MI User Profile |
TradeLog is a great tool for cash accounts; following trading activity, costs, and addressing trading taxation issues. Takes some work getting set up (works great with IB). Not cheap, but worth it. Support has been very responsive for me and good tutorials available. I use a standalone LLC to trade cash accounts in. Some work to do setting up and then moving accounts, but eliminates wash sale issues, which can be onerous... Comments on Nirvana's role are right on; it is outside of Nirvana's space to guide tax issues and recommend brokers, but they've done a great job with the automated trading and automated interfaces to the broker(s). There is some good info to be found on broker and tax issues within the Forum, and I believe the Forum community can be of help to others on these issues. Took me years to arrive at a good personal state on this stuff through trial and error, but I believe many OV users are willing to help others to get there quickly, so users and Nirvana are successful. Tax and commissions are major trading components, but with some work... Steve: Thanks for the head up on TaxAct. Very easy to exceed 10M in trades. | ||
| Mark Holstius Elite Posts: 744 Joined: 10/11/2012 Location: Sleepy Hollow, IL User Profile |
Brian - would you be willing to start another thread to add some details about the benefits of setting up an LLC for trading? Thanks for considering it, Mark | ||
| Keith Parsons Member Posts: 25 Joined: 3/12/2014 Location: Durban, South Africa User Profile |
I am not sure if this is the correct post to write this. If not apologies to all. Brief Comments: 1) I now have two live (IB) accounts running on FTM (Rev06)I have used all your settings with my exposure set at 150%. I will go to 195% when you indicate that you are happy with the portfolio. 2) I have spent a lot of time ensuring that I now fully understand/ appreciate the implications of the various settings. That I can now set up my accounts to "suit my trading appetite" Using your calculator certainly gets the trade sizes spot on very quickly once the multiplier settings have been adjusted accordingly. 3) Question please: Is it possible for us to be advised as to how FTM closes off trades. i.e is it based on MOO and if so over what time period ? The reason I ask this is that all my entries were very good but the exists a bit disappointing. In brief my results for my first two sets (Mon & QVCA) FTM trades on two (2)PCs are: PC1 - Unrealized P&L for both trades on 17th was $78.56 Un & Realized P&L FOR BOTH TRADES ON 18th is $46.74 Diff between 17th & 18th is -$31.82 PC2 - Unrealized P&L for both trades on 17th was $36.70 Un & Realized P&L FOR BOTH TRADES ON 18th is $20.37 Diff between 17th & 18th is -$16.33 I do realise the implications of opening / closing trades with MOO. I also realise and have the comfort of seeing the positive results of all your extensive testing. That in another circumstance the closing trades may well be more favourable.? However and in ending I fully understand / appreciate that this could be confidential data and therefore would not expect to be advised. Appreciate as always your work and the input / advice of all members. Thank you | ||
| BrianD Legend Posts: 302 Joined: 2/23/2013 Location: Grand Rapids, MI User Profile |
First, I'm a little lost at your question, but as a cursory review of your 17th to 18th Unrealized (End of Day on 17th?) to Realized (position Closed at Open on 18th?) values, MON did drop overnight (~$.30USD per share). QVAC dropped too (~.$10USD). Second, I don't know how Mark's FTM can affect when your trades occur. That should be your settings (i.e. submit before market open/after (e.g. 9:35EST?). Personally, when I review my reported Closed values, as shown in my emails, I understand commissions charges are part of the final value I see. So, a minimum potential reduction of ~$1 is safe to assume in the 'Realized' value in 'Realized' profit. As Mark showed above, commissions are important in final performance. Finally, compare email trades results with your IB statement for more detail. BTW, I believe leveraged trades show some funny 'Realized' results too. Another Forum thread would be best place to draw out some other's input on these issues. | ||
| Keith Parsons Member Posts: 25 Joined: 3/12/2014 Location: Durban, South Africa User Profile |
Appreciate yr responding. May well be my "leverage" that puzzled me Many thanks | ||
| Mark Holstius Elite Posts: 744 Joined: 10/11/2012 Location: Sleepy Hollow, IL User Profile |
Sorry I didn't get back to you sooner, but I've been busy with family. Your question about the change in value overnight is a common one that's caused a lot of debate since OV was created. I'm glad you brought it up again, because it got me thinking about a way to test a couple of theories with my new portfolio. Unfortunately, I've found the tests take a number of hours to run, so I hope to have some interesting statistics later today or tomorrow. In the meantime, since you mention that you've limited your exposure to 150% until I’m happy with the portfolio I want to clarify something. The way to change or limit exposure / risk is thru the use of the "Trade Multiplier". The "Trade Multiplier" setting will determine the allocation % / trade. In my FTM portfolio, the strategies were constructed using 10% allocation, so setting the Trade Multiplier in the Portfolio at 40 will result in trades at 4% allocation. (Trade Multiplier of 20 will yield 2% trades). The "Max % Of Equity" determines how much of your account can be used. If set at 50%, half your account can be traded. If set at 200%, you can use 2X margin. The individual trade size, say 4%, will stay the same without regard to what you set as the Max % Of Equity - the only change will be the number of trades you'll be able to take. Using 40% Trade Multiplier giving 4% / trade (that means you use 4% of your Equity / trade - NOT 4% of Margin available or any lower equity available due to a <100% Max % Of Equity setting) : With Max % Of Equity at 100%, you have enough equity to have 25 trades open. With Max % Of Equity at 200%, you have enough equity to have 50 trades open. Raising or lowering the Max % Of Equity doesn’t affect the trade size, it just affects the # of trades you can have open at the same time. What I’m doing myself is setting the Trade Multiplier to 20% so that I take trades allocated at 2% of equity until I’m comfortable with how things are going with the portfolio. 4% has proven to give good results over the past 15 years, so I’m just being cautious using 2% for a while. You may want to do something else... Hope that helps, Mark [Edited by Mark Holstius on 7/23/2017 2:10 PM] | ||
| Keith Parsons Member Posts: 25 Joined: 3/12/2014 Location: Durban, South Africa User Profile |
Thank u for responding. I have in fact been using the 'Trade Multiplier' (via Tools / Port Library ) and recently analyzing the different T.M. settings to Omnivesting outputs (Steve M platform). I for one need to spend a lot of time understanding / appreciating Steve's platform and the valuable data it displays. Good luck with your theories on the new portfolio. Rgds NB: Sure appreciate the time that you take out in explaining each and every post |
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