transaction-costs

If your cost per round trip equals the move you are trying to capture, you need 100 percent directional accuracy to break even. This lesson computes that hurdle, replaces accuracy with metrics tied to a tradeable decision, and covers the capacity and latency limits that decide whether a real edge is worth anything.

Execution costs are small numbers buried in large noise, so distinguishing a good desk from a lucky one takes more data than most institutions have. This lesson covers what transaction cost analysis can establish, the reversion test that detects information leakage, and what happens to any measure once people are paid on it.

Trading fast costs impact. Trading slowly exposes the order to drift. Neither can be minimised without worsening the other, so the schedule is an optimisation with a parameter that encodes urgency. This lesson builds that trade-off, derives the shape of the resulting trajectory, and identifies what the model cannot see.

The cost of a trade is not the commission, and it is not the spread. It is the gap between the return the decision would have produced on paper and the return the account actually got. This lesson builds that measure, decomposes it into four sources, and shows why the largest component is often the trade nobody made.