A strategy can be profitable in R (multiples of its risk) and still lose money, because each trade pays the same commission and slippage however small its stop is. In our tests, break-of-structure, failed-break fades and VWAP-cross rules all had real edges before costs that tight stops and frequent trading turned into losses on MNQ.
The arithmetic
On one MNQ contract a point is worth $2, and a round trip costs roughly $2.50 to $3 in commission and fees, before slippage. A trade risking 5 points ($10) that wins 1R makes $10 gross, and the cost takes a quarter of it. The same 1R on a 30-point stop makes $60, and the cost is a rounding error.
Edges that costs erased
- Break of structure (higher low, then a break of the swing high): +177R over three years and positive every year, but 2,613 tight-stop trades made only $1,307 in total, with a 36% drawdown.
- VWAP crosses on one-minute bars: profitable before costs in both 2014–2020 and 2021–2026, then −$69k and −$30k after costs at about 20 trades a day.
- Fading failed opening-range breaks on the overnight session: +53R in risk units, −$1,945 after costs.
- Absorption fades into key levels: +49.6R, +$204 after costs over three years.
The same entry, a wider stop
On the 15-minute opening range breakout, entering on a pullback to the range, a stop just below the pullback bar lost money ($2,213 over three years), while a stop at the far side of the opening range made $8,858 on the same entries. On a rule that buys or sells the first 5-minute candle after the open, 10- to 20-point stops lost at every target, and a 30-point stop with a 3R target was positive every year from 2022 to 2026.
A quick check for any strategy
- Work out the average gross profit per trade in dollars, not R, and compare it with your round-trip cost plus a tick of slippage each way.
- If costs take more than about a third of the gross edge, small changes in fills will decide whether it makes money.
- Be wary of strategies with thousands of trades and tiny stops. They look smooth in R and are the most sensitive to costs.
Simulated results on historical data. They don't guarantee future results; see the risk disclosure and CFTC Rule 4.41.