Transaction-cost sensitivity
The backtest re-run at six cost levels, from 0% to 0.25% per unit traded, with every order counted by type.
- Orders per year
- 688
- Turnover
- 45× equity / yr
- CAGR at 0.25% cost
- 34.4%
Findings
- About 688 orders a year and turnover of 45× equity, mostly from resizing positions to their volatility targets.
- CAGR falls by about 0.65 points for each basis point of cost per unit traded.
- 2025 returns 7.0% at the base-case 0.07% and −0.9% at 0.25%.
Method
The base case charges 0.07% per unit traded, made up of Binance's standard 0.05% taker fee and 0.02% for slippage. The backtest was re-run at five other cost levels between 0% and 0.25%, and every order it generated was classified as an open, close, trim or add.
Results
| Order type | Count, 2021–26 | Median size (% of equity) |
|---|---|---|
| Open | 807 | 10.1% |
| Close | 792 | 6.9% |
| Trim | 1,316 | 3.7% |
| Add | 1,029 | 2.7% |
Stop-loss exits executed on the exchange are additional to these counts.
Turnover is about 45× equity a year. Most of it comes from trims and adds that hold each position at its volatility target. At 0.07% per unit traded, that turnover costs roughly 3% of equity a year.
| Cost per unit traded | CAGR | Sharpe | Max drawdown | 2025 |
|---|---|---|---|---|
| 0% (theoretical) | 50.4% | 1.80 | −17.7% | 10.2% |
| 0.04% (maker, no slippage) | 47.7% | 1.72 | −18.1% | 8.4% |
| 0.07% (base case) | 45.7% | 1.67 | −18.5% | 7.0% |
| 0.10% | 43.8% | 1.61 | −19.0% | 5.6% |
| 0.15% | 40.6% | 1.52 | −20.1% | 3.4% |
| 0.25% | 34.4% | 1.33 | −22.8% | −0.9% |
Implications
CAGR falls by about 0.65 points per basis point of cost. Across the full sample, moving from the base case to 0.25% lowers CAGR from 45.7% to 34.4% and Sharpe from 1.67 to 1.33. In a low-return year the cost assumption can decide the sign of the result; 2025 returns 7.0% at the base case and −0.9% at 0.25%. Fills on Binance Demo have so far landed within ±5 bps of the market price in the same minute (Note 07), which is consistent with the base-case assumption.
The inputs a copier controls are the account's fee tier (Binance standard is 0.02% maker and 0.05% taker, lower when fees are paid in BNB) and account size, which determines how many of the small resizing orders clear Binance's minimum order value (Note 06).
Limitations
A flat cost per unit traded ignores market impact, which grows with order size. It is negligible at the current scale and would need to be modelled at materially larger capital. Less frequent resizing lowers turnover. It was tested and not adopted: the cost saved did not justify the larger drift from target risk.