Fees on stock market calculation

Question

i am working on a backtest and I had a problem with the fee calculation.

Supose the fee is 0.1%

And I have already the buy/sell prices so I can retrieve the percentage of profit:

where:

df['Profit'] = ((df['Sells'] - df['Buys']) / df['Buys']) + 1

Example:

Buys	Sells	Profit
3697.35	3698.69	1.000362
3698.24	3699.81	1.000425
3703.69	3706.23	1.000686

So the returns without the fees are

returns = df.Profit.cumprod()

How can I calculate the actual return (with the fees) ?

Answer 1

Let's take a look at your formula first:

Profit = (Sells - Buys) / Buys + 1
       = Sells / Buys - Buys / Buys + 1
       = Sells / Buys - 1           + 1
       = Sells / Buys

Now due to the transaction fee, 0.1% is deducted from your Sells and also added to your Buys. We can thus rewrite the code as:

fee = 0.001
df['Profit'] = df['Sells'].mul(1 - fee) / df['Buys'].mul(1 + fee)