What is Transaction Cost Analysis?

What it is

Transaction Cost Analysis (TCA) is the systematic measurement of how much it costs to execute your trades — not the commission you pay, but the hidden costs of how your orders are filled. It answers questions most traders never think to ask: "How much did slippage actually cost me? Does my broker fill orders worse at certain times? Is latency affecting my results?"

Every time you place a trade, there's a gap between the price you intended and the price you received. That gap is slippage. Over hundreds of trades, slippage compounds. A strategy that backtests at +8% annual return may deliver only +4% after real execution costs — or worse, the entire edge can be consumed by poor execution. TCA makes this visible.

note

TCA charts are accessed from the live strategy analytics panel. You must first load your live strategy trades before these charts become available. See Loading Live Trades for the full flow.

Why it matters for algorithmic traders

A strategy can be well-designed, thoroughly optimized, and walk-forward validated — and still underperform in live trading. One common reason is execution cost. If your broker's fills consistently differ from your backtest prices by even a small amount per trade, that difference compounds across hundreds of trades and can erode a genuine edge entirely.

TCA makes this visible. It closes the final gap in the strategy lifecycle: optimization tells you if the strategy works in theory, WFO tells you if it generalizes, and TCA tells you if your broker executes it faithfully.

What TCA measures

Component	What it measures	Why it matters
Slippage	Difference between intended price and actual fill price	The single largest hidden cost for most strategies
Latency	Time between order submission and fill confirmation	Affects slippage on fast-moving markets
Execution precision	How consistently fills match intended prices	Reveals systematic execution bias
Temporal patterns	When execution quality is better or worse	Identifies optimal and worst trading hours

The backtest-to-live gap

Every strategy has a gap between backtested performance and live performance. Some of that gap is expected — backtest assumptions are always slightly optimistic. But how much of the gap is due to the strategy itself, and how much is due to execution? Without TCA, you can't separate the two.

Strateda's TCA suite gives you this separation. If your live strategy underperforms the backtest by 3%, and TCA shows 2.5% of cumulative slippage drag, you know the strategy is performing as expected — the gap is execution cost, not strategy failure. If TCA shows only 0.5% of slippage but you're underperforming by 3%, the issue is the strategy itself, and you need to re-optimize.

How to access it

TCA is available on Pro and Premium plans. It requires live trading data — you must have at least one strategy deployed via the MT5 Expert Advisor with completed trades.

To access the TCA dashboard:

1. Deploy a strategy live via MT5.
2. Accumulate trades (the more trades, the more robust the analysis).
3. Open the Execution Quality section from the monitoring dashboard.

TCA analytics update as new trades are executed. The views become more statistically meaningful as trade count grows — aim for at least 50 trades for initial analysis, 200+ for robust conclusions.

What you see

The TCA dashboard provides seven analytics views, each examining a different dimension of execution quality:

View	What it shows
Slippage Distribution	Histograms of entry and exit slippage across all trades
Latency Distribution	Histogram of order-to-fill times with percentile statistics
Latency vs Slippage	Whether slower fills produce worse slippage
Slippage vs P&L	Whether execution quality varies with trade outcome
Temporal Patterns	Slippage patterns by hour of day and day of week
Execution Precision	Overall fill accuracy relative to intended prices
Slippage Cost / Margin	Execution cost normalised by capital committed per trade

Each view is described in detail on its own page.

How to interpret it

Good execution quality

• Slippage distribution centered near zero, with a narrow spread. Most fills are very close to the intended price.
• No systematic bias — slippage is roughly symmetric (positive and negative slippage are equally common). The broker isn't consistently filling you worse than intended.
• Latency is low and consistent — fills come back quickly with little variation.
• No time-of-day patterns — execution quality doesn't deteriorate at specific hours.
• Slippage is independent of trade outcome — the broker fills winning and losing trades the same way.

Poor execution quality

• Slippage distribution is shifted away from zero (systematic negative slippage). Most fills are worse than intended.
• Asymmetric slippage — consistently worse on entries than exits, or consistently worse in one direction.
• High or variable latency — fills take a long time or vary wildly, creating unpredictable execution costs.
• Clear time-of-day patterns — slippage spikes during specific hours (often during low-liquidity sessions).
• Slippage correlates with P&L — if losing trades have systematically different slippage than winning trades, execution bias may be present.

What you can do about it

TCA doesn't just diagnose problems — it informs action:

• Change brokers — If slippage is consistently poor, the data gives you concrete evidence to compare against a different broker.
• Adjust trading hours — If temporal analysis shows slippage is 3× worse during the Asian session, consider restricting your strategy to London/New York hours.
• Resize positions — If latency-driven slippage is significant, reducing position size during volatile periods may improve net performance.
• Update your backtest model — Feed real slippage data back into your backtesting assumptions for more realistic forward estimates.

Example

A trader deploys a DEMA/EMA crossover strategy on EURUSD via MT5. After 200 live trades:

• Entry slippage: Mean of −0.3 pips, centered slightly negative. Most fills are within ±1 pip of intended price.
• Exit slippage: Mean of −0.1 pips. Exits are filled more accurately than entries.
• Latency: Median of 600ms, 95th percentile at 980ms. Consistent with typical MT5 cloud-to-EA signal delivery times.
• Temporal pattern: Slippage is 2.5× worse between 22:00–02:00 UTC (Asian session) than during London hours.
• Cumulative slippage drag: −1.2% over 200 trades.

Interpretation: The strategy's backtest showed +6.5% return. Live return is +5.1%. TCA reveals 1.2% of the 1.4% gap is attributable to execution costs — the strategy is performing almost exactly as expected. The Asian session slippage pattern suggests the trader could improve net performance by approximately 0.4% by avoiding trades during those hours, at the cost of slightly fewer trades.

This is the kind of insight that separates informed deployment from guesswork.