A daily-rebalanced book pays costs every day, not once per trade idea. Small per-trade costs turn into a large yearly drag when a big share of the book changes hands daily.
Costs take about 3.65% of the book a year. Add the yearly return before costs to see what's left.
Yearly cost = share of the book traded per day × cost per side × trading days. At 10 bps a side, every 10% of the book traded per day costs about 3.65% a year over 365 days. A book that trades half of itself every day pays about 18% a year at the same cost.
Fast factors, such as short-term reversal, change most of their holdings daily. Their before-cost returns can be large and still disappear once turnover is priced. Funding on perpetual futures and borrow on short stock positions come on top and can move either way, so price them separately.
For a strategy that trades setups with a stop rather than rebalancing a book, use the cost-in-R calculator.
The one-page checklist, free. Confirm the email and the PDF opens straight away; one worked check each Tuesday after that.
Arithmetic only; nothing here is a result of any strategy or investment advice.