Glossary
Basis point (bp)
One hundredth of a percent (0.01%). Our lab quotes the average result per trade in basis points of price, so different markets can be compared.
A basis point (bp) is 0.01%, or 0.0001 as a fraction. A move of 100 bp is 1%. Our lab reports the average result per trade in basis points of the entry price, before and after costs.
Example
Gold trades at 4,000.0 USD. One basis point of that price is 4,000.0 × 0.0001 = 0.40 USD per ounce, which is 4 pips in our ledger. A trade that gains 2.00 USD per ounce has made 2.00 ÷ 4,000.0 = 0.0005, or +5 bp. On a 10-ounce position, 1 bp is worth 4.00 USD.
Why it matters
Basis points put results and costs on the same scale. In our gold studies, spread and commission came to about 1.1 bp per trade. A rule that earns +0.4 bp before costs therefore loses about 0.7 bp after them.