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I trade altcoins.

Could someone tell me, how to calculate the total amount of coins for a trade with a fixed amount of risk (including fee).

For example, my risk is $100 per trade

I use this formula to calculate total amount $100 / (buy level - stop level)) = number of coins

And it works but the problem that exchanges usually take fee 0.25% at the opening and closing. For example Bittrex has 0.25% commission for all deals.

How to calculate the correct number of coins so that in the end on the stop i will lose only $100 ?

What formula do I need to use?

  • How is your initial stop worked out, is it a set percentage or below the last low or something else? – Victor Feb 6 '18 at 23:35
  • Slightly unrelated but I m hardpressed to find a coin you cant get between Binance/Kucoin (that have 0.05 to 0.1% fees) that you need Bittrex for. Especially if you re day trading paying 5 times more fees add up. – Leon Feb 7 '18 at 9:07
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The formula you are looking for is as following:

$100 / ((buy level - stop level) + commission x (buy level + stop level)) = number of coins

So, for a commission of 0 and buy and stop levels of 1000 and 900 respectively, you would trade with your existing formula and with the new formula exactly one coin. with a commission of 0.25% (or 0.0025 for the formula) you would trade 0.95465 coins. Then your PnL would be:

900 x 0.95465 - 1000 x 0.95465 - 0.0025 x 1000 x 0.95465 - 0.0025 x 900 x 0.95465 = 100 USD (sales proceeds) - (purchase expenditures) - (purchase commission) - (sales commission) = 100 USD

This being said, it is very unrealistic to expect that you will be able to execute exactly at your stop loss in a volatile and illiquid market as those for altcoins. You might want to reconsider your definition of risk to accomodate the possibility that you liquidate below your stop level.

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It's not clear what you are describing. My best guess is that you want to risk $100 per trade, regardless of the number of coins. For that scenario, here's the formula:

S = [ ( -401 x B) -40,000 ] / 399

where "S" is the gross sale price before exit commissions

Cost per coin is $500.

You buy two of them so you lay out -$1,000 which is "B" (the cost before the buy commission)

Commission is .0025% or - $2.50 for a net cost of -$1,002.50

S = [ ( -401 x -1000) - 40,000 ] / 399

S = $904.76

.0025% sale commission is $2.26 so you net $902.50 from the trade. Cost was -$1,002.50 so the total loss is -$100

Your stop is $452.38 (Gross sales proceeds of $904.76 divided by two).

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If you set your stop as a percentage of the initial purchase price you can estimate the commissions and then deduct these from the $100 in the calculations.

For example, say you use a stop loss of 10% and for simplicity lets say your purchase price is $10.

Purchase price = $10 Stop = 10% x $10 = $1 Initial Stop Price = $10 - $1 = $9

If we ignore the commission for now, the number of units to buy from your formula would simply be:

$100/$1 = 100 units (so using this as an estimate)

From buying 100 units @ $10 each the total purchase would be $1000.

Thus the commission on $1000 @ 0.25% would be $2.50. As we don't know at what price you will sell at (as we don't know if you will make a profit or a loss) so we can use the same amount for the sell commission. So our estimated total commission for the round trade (in and out) would be $5.

Now we can include this into your formula:

No. of Units = ($100-$5)/($10-$9) = $95/$1 = 95 units.

If your commission was a fixed dollar amount you could simply deduct them from the $100 risk amount as above.

Where it becomes a bit more difficult is where your commission is percentage based (as yours is) and the initial stop varies from trade to trade (that is, it is not a fixed percentage). In this case you would probably need to estimate what your commission will be on each and every trade depending where your stop is, and then deduct this from the $100 in the formula. You will again need to double the commission for the entry as your exit commission won't be known until you sell.

If you want to be extra conservative then you could see what commissions you are paying after a number of trades, and use the maximum commission charged as a guideline. Then deduct this from the $100 in your formula. However, this will mean that you are purchasing less each trade.

Or you could take the average total commission after a number of trades and revise this regularly if you don't want to be too conservative.

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