IB commissions on forex - want to ensure I'm not being dumb

[Adamus]

I just want to make sure I'm not making a schoolboy error about the way IB charge commission on forex trades. This is cut and paste from IB's TWS trade log:

ACTION QUANTITY UNDERLYING  DESCRIPTION    PRICE   CURRENCY  TIME                      COMMISSION
BOT       5,000,000   USD                 USD.JPY Cash    91.830    JPY                MAY 6 18:16:07    8702.70

That's the commission in Yen at the end of the line, because it's a USDJPY trade.

I'm backtesting in NinjaTrader and it forces me to enter the commission rate in dollars and so far no-one on the excellent NinjaTrader support forum thinks that this is a problem.

Can someone just tell me I'm not making a dumb mistake here, but IB charge forex commission in the currency being bot or sold, right? It's then converted to a dollar amount, but it's still charged in the Yen or Swiss Franc or Euro.

IB's website is ambiguous, at the rate of 0.2 ticks per currency unit:

0.2 basis point (1 basis point=0.0001) * Trade Value

(Commissions for forex trades are calculated off the trade value and then converted and charged to the base currency of the account.)

Minimum: USD 2.50

(Order minimums are quoted in USD with USD equivalent being utilized for other currencies.)

Example:

USD 50,000 daily volume for EUR = USD 2.50

USD 1,000,000,000 monthly volume for EUR = USD 20,000

So what I'm saying to NinjaTrader support is that I need to set the commission for backtesting currencies in the currency itself. Yet I'm forced to set it in USD, so NinjaTrader will get the commission wrong on all the trades in the backtest, by an amount dependent on how far the exchange rate was on the date of the trade from the rate I use to calculate the USD equivalent when setting it up.

Or no?

 

[Straddle8]

In your original order from IB is the 5.000.000 yen or USD?

In case your position size stays more or less constant you could calculate a fixed dollar amount as the commission cost for NT. I also use NT and IB, but I just use NT to give me the entry and exit levels. Everything else I calculate in excel.

I don't think it's possible to let Ninjatrader do what you want to do if IB keeps storing the commission cost in yen. You could always try if IB can note the commission cost in another currency.

 

[Adamus]

That's USD. I bot 5000000 USD in yen. The pair is USDJPY. So I'm short yen at 91.830 which means I'm short 459,150,000 yen (almost 500,000,000 is the way I think of it - a million dollars is a hundred million yen).

So you're saying I'm right, then.

I guess what I could do is add it as 1 pip slippage instead.

 

[Straddle8]

As long as that 1 pip slippage is representative for your commission cost. You can also ask the help desk at IB (via the chat function) if it's possible to change the currency of the commission rate.

 

[Adamus]

That's a good idea, although I never saw the option anywhere.

 

[leovirgo]

IB effectively charges commission in your base currency. Whatever is the source, be it dollar yen swissy or sterling, it will be converted back to your base currency and taken from cash balance (in base currency). Therefore, your P&L in other currencies will not reflect commission charges.

 

[Adamus]

that still leaves me wondering - is it 0.00002 USD or 0.00002 yen/swissy/sterling? Originally, I mean. Before it gets converted to my base currency.

 

[leovirgo]

Like the one in your opening post, on my daily trade list report, it shows source currency i.e, yen for USDJPY. however, on the monthly report it is converted directly into base currency for each transaction. why do you have to use exact figure? It will be the same if it is converted "on the spot".

 

[Adamus]

for backtesting in NinjaTrader, which requires a dollar value. Obviously the dollar value of the commission varies over the period of the backtest.

 

[leovirgo]

IMO you can use 0.2 basis point in USD value for backtesting purposes. The more important areas to look are slippage and, in my own experience, time zones. In tradestation(TS), it is a nightmare to use a fixed time for backtesting, say 8AM UK time as TS adjust 'all' historical bars with 'current time'.

 

[Adamus]

Yes, well I guess it is all a bit of minor detail, since the profit per trade is generally 2 or 3 times greater than the commission. Don't know what TS is doing, haven't used it with intra-day data, but NinjaTrader has got its own little portfolio of issues to deal with - of course using the beta version doesn't help, but it should come out of beta in a couple of weeks.