Cost Drag

Cost drag is the cumulative effect of per-trade cost on a strategy's results as trading frequency rises. One round turn costing a single pip is trivial in isolation; the same cost taken five hundred times a year removes five hundred pips from the equity curve, which on most retail account sizes is the entire difference between a good year and a flat one. It explains why high-frequency approaches need a far larger raw edge than their win rates imply, and why a slower strategy with a mediocre hit rate can outperform a faster one that looks better on paper. The arithmetic belongs before the strategy rather than after it: multiply the all-in round-turn cost by the expected annual trade count, and set that total against the return you are expecting to earn.