Costs & slippage in ticks (NQ/ES)

A scalping backtest on ES shows a 58% win rate with a 4-tick target and a 4-tick stop. That’s a positive edge on paper — buy, wait a few seconds, collect a point. Add realistic costs and the same strategy needs a win rate near 80% just to break even. Nothing about the signal changed. Only the accounting did.

Transaction costs (chi phí giao dịch) are everything between the price on your chart and the money in your account: broker commission, exchange and clearing fees, regulatory fees, and slippage (trượt giá) — the difference between the price your rule assumed and the price you actually got. In a backtest they are the easiest thing to leave out, and for short-horizon order-flow strategies they are often bigger than the edge.

Chart first: the tick is the unit

Measure costs in ticks, not dollars, because your targets and stops are in ticks. The minimum price increment and its dollar value come from the exchange’s contract specification (CME Group):

Now convert a cost into ticks. The numbers below use an illustrative all-in round-turn cost (commission + exchange + clearing + NFA fees, entry and exit together) of $4.00 for an E-mini and $1.00 for a micro. These are round numbers for the arithmetic, not a quote — real costs depend on your broker, your volume tier and current exchange fee schedules, so plug in your own.

Round-turn cost in ticks = (round-turn $ cost) / (tick value)

ES   $4.00 / $12.50 = 0.32 ticks
NQ   $4.00 /  $5.00 = 0.80 ticks
MES  $1.00 /  $1.25 = 0.80 ticks
MNQ  $1.00 /  $0.50 = 2.00 ticks   <- the same "cheap" dollar cost is the heaviest in ticks

Two lessons hide in that table. First, a micro is not a “cheaper” way to run the same strategy: in tick terms MNQ can cost several times what ES costs. Second, NQ’s cost per tick is 2.5× ES’s — although NQ also moves many more ticks per day, so compare cost to your average trade size in ticks, not to the tick alone.

Slippage: model it per side

Commission is a known number. Slippage is a distribution, so you model it with a conservative assumption. The common practitioner convention — a rule of thumb, not a law — is 1 tick per side on liquid index futures in normal conditions:

• Market entry or stop exit: you pay at least the spread and often more in fast markets. Stops are market orders when triggered, so stop slippage is real and skews against you on news.
• Limit entry or target exit: no price slippage, but a different cost — your limit is not guaranteed to fill when price only touches it. A conservative backtest only counts a limit fill when price trades through the limit by at least one tick. Otherwise the backtest wins every touch, including the ones where you were last in the queue.
• News and the open: one tick per side is optimistic around 8:30 ET data releases, the cash open and FOMC. Either exclude those windows or model 2–4 ticks there.

Worked example: one tick per side kills the scalp

ES scalper: 4-tick target, 4-tick stop, 58% win rate on the backtest with no costs.

Gross expectancy per trade
  = 0.58 × (+4) + 0.42 × (−4)
  = 2.32 − 1.68
  = +0.64 ticks   (= $8.00 per contract)

Costs per round turn
  commission + fees      0.32 ticks   ($4.00 illustrative)
  slippage 1 tick/side   2.00 ticks   ($25.00)
  total cost  c        = 2.32 ticks

Net expectancy = 0.64 − 2.32 = −1.68 ticks  (≈ −$21 per trade)

The strategy goes from +$8 to about −$21 per trade. Now ask what win rate it would need. With a target of T ticks, a stop of S ticks and a round-turn cost of c ticks, each win nets (T − c) and each loss costs (S + c). Breakeven win rate p* solves p(T − c) = (1 − p)(S + c):

p* = (S + c) / (T + S)

no costs:   p* = 4 / 8           = 50.0%
c = 2.32:   p* = (4 + 2.32) / 8  = 79.0%

A 58% scalper is nowhere near 79%. Now stretch the trade: an NQ strategy with a 40-tick target and 40-tick stop (10 points each way), same 1-tick-per-side slippage (2 ticks round turn) plus NQ’s 0.80-tick commission, c = 2.80 ticks:

p* = (40 + 2.80) / 80 = 53.5%

The same costs that demanded a 79% win rate on the 4-tick scalp only add 3.5 percentage points to a trade 10× wider. Costs are roughly fixed per trade; the edge scales with trade size. That is why short-horizon order-flow ideas need the most careful cost modelling and why the edge per trade should be reported in ticks alongside cost per trade in ticks.

A cost-aware backtest checklist

1. Report gross and net results side by side, and the average trade in ticks.
2. Model commission + fees as a round-turn constant in ticks for the actual contract.
3. Model slippage per side: ≥ 1 tick on market entries and stop exits, trade-through rule for limits, wider assumptions in news windows.
4. Re-run with double your slippage assumption. If the edge dies at 2 ticks per side, it was too thin to trust at 1.
5. Compare against your live fills after the first 50–100 trades and update the model with real numbers.

Common mistake: Testing on bar data and filling limit orders whenever the bar’s high or low touched the price. On a 1-minute bar that “touch” may have been a single contract at the extreme while 400 contracts sat ahead of you in the queue. Those phantom fills cluster on the best trades — the reversals at exact highs and lows — so the bias inflates exactly the results you care about most.

Recap:

• Tick sizes from CME: ES, NQ, MES and MNQ all tick 0.25 points, worth $12.50, $5.00, $1.25 and $0.50 respectively.
• Convert round-turn costs to ticks: the same dollar cost weighs most on MNQ and least on ES.
• Model slippage per side (practitioner default: 1 tick on market orders and stops; trade-through for limits). Breakeven win rate is p* = (S + c)/(T + S).
• Costs are fixed per trade while edge grows with trade size, so tight scalps are the most cost-sensitive.

Quiz: An MNQ strategy targets 12 ticks and stops at 12 ticks. Using the illustrative $1.00 round-turn cost and 1 tick of slippage per side, what win rate does it need to break even? Answer: Commission in ticks = $1.00 / $0.50 = 2 ticks; slippage = 2 ticks; c = 4 ticks. p* = (12 + 4) / 24 = 66.7%. Explanation: on a micro, commission alone is two full ticks, so a 12-tick scalp gives up a third of its reward and adds a third to its risk. The same strategy on NQ (c = 2.80) would need (12 + 2.8)/24 ≈ 61.7%.

Further reading:

• CME Group — E-mini Nasdaq-100 contract specs and Micro E-mini Nasdaq-100 contract specs. Tick size and multiplier.
• CME Group — Micro E-mini S&P 500 contract specs and Discover equity index notional value & price (ES tick = $12.50).
• Check your own broker’s published commission and fee schedule before plugging numbers into a backtest.

Prerequisite: M10.01 Why most backtests lie, M0.05 (contracts & margin) · Next: M10.03 In-sample, out-of-sample & walk-forward · Connects to: M6.08 (stops & targets), M6.09 (position sizing), M3.08 (DOM and queue position)

Educational content only — not financial advice. Futures trading involves substantial risk of loss.