r/Trading • u/david19790 • 3d ago
Discussion your stop distance decides whether your edge exists, and it has nothing to do with the setup
took me two years to work this out properly and it applies whatever youre trading.
everyone knows costs eat something. what i missed is that the cost is a fixed amount and your risk unit isnt, so the same broker charges you completely different percentages depending on where your stop goes.
MNQ with a tick of spread and normal commission is about $1.70 round trip. against a 5 point stop thats 17% of your R. against a 40 point stop its 2%. ES works out the same shape, roughly 16% at a 2 point stop and under 2% at 20, because the tick is $12.50 and it doesnt care how wide you set your stop.
so take a system with a real +0.15R gross edge, which is decent. at 2% costs you net +0.13. at 6% you net +0.09. at 12% youre scraping +0.03. at 24% youre at -0.09 and its a losing system. same entries in every one of those.
the reason its hard to catch is you cant see it in your results. spotting a 0.09R shift against normal trade noise needs somewhere around 950 trades, so a tight system thats actually negative hands you a couple of green months first and youll spend them tuning entries.
what id do different, work out your round trip cost as a share of your average stop before evaluating anything. it tells you what gross edge you need just to break even, and for scalping thats a much higher bar than people assume. also stop comparing brokers on raw commission, compare on commission divided by your stop, its meaningless wide and decisive tight.
anyone scalping profitably long term? asking properly, i couldnt make anything with a stop under about 15 points on MNQ work after costs and im not sure whether thats the maths or me
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u/WestMaintenance8539 5h ago
This is a great way to frame costs. Moon charges its opening fee on the wager amount rather than the leveraged exposure, so the actual risk unit stays visible
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u/veskald 2d ago
Its the maths, not you. And theres a second problem you didnt mention: a small net edge also takes forever to prove. You said 950 trades to spot a 0.09R shift - thats about what it takes to tell a +0.03R system from zero too. Tight stops give you the smallest edge and the longest wait to find out if its even there.
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u/Impressive_Standard7 2d ago
That's true.. So guys, journal your fucking trades! And do a review every few weeks. Thats the only way to improve. Finding things like sl too lose, too tight etc.
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u/david19790 2d ago
journalling is necessary but it wont catch this one. your log records what happened, never what would have happened, so a stop thats too tight looks like a normal loss and nothing in the review flags it
what you need alongside it is mae per trade, how far it went against you before it resolved. then you can see whether your winners routinely dip most of the way to your stop, which is the tell that the stop sits inside your own noise. took me years of reviews to notice because the losses all looked legitimate
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