Erosion
Erosion is the totality of the friction costs of your trading: every cost you pay to open, close and hold a position. When you trade with PFArmour these costs are paid on both sides — the prop firm account and the broker account — and they eat into the potential performance of the operation.
Formally, the erosion of a trade is the difference between the actual outcome of a broker trade and the expected one. The only component that can occasionally work in your favour is the swap, which on some instruments is positive when holding overnight; everything else is always a cost.
Why erosion exists
Hedged does not mean free. Armour hedges your positions, but each position is still a transaction — and transactions are paid for, not earned, on both accounts. Commissions, spreads and swap fees are charged on the prop account and again on the broker account. As time passes and trades accumulate, these friction costs mature into erosion.
The breakdown
PFArmour tracks erosion per trade and breaks it down by component, so you can see exactly where performance is leaking. Throughout the dashboard, master means the prop firm account and slave means your brokerage account:
- Master commission — performance eroded by commissions on the prop firm account.
- Slave commission — performance eroded by commissions on the brokerage account.
- Master swap — performance eroded by swap fees on the prop firm account.
- Slave swap — performance eroded by swap fees on the brokerage account.
- Rounding — performance eroded by rounding lot sizes when trades are copied to the brokerage account.
- Equaliser — performance eroded by exceeding targets or drawdowns on the prop firm account (for example, closing a phase at +9% when the target was +8%: the extra performance is produced on the prop side but paid for on both sides).
- Fail-to-Copy — performance eroded by trades that were not copied to the brokerage account.
- Spread, slippage & latency — performance eroded by spreads, slippage and execution latency on each pair of trades; this metric is merged between the prop firm and brokerage accounts.
How to interpret it
The detailed breakdown makes it straightforward to identify which factors in your prop trading contribute most to erosion — and act on the cause instead of the symptom.
A concrete example: if most of your erosion is swap erosion, your trades are costing you the most while they sit open overnight. Not holding positions overnight would remove the problem at the root — or, before holding, you can check the swap fees in advance and decide whether the hold is worth paying for.
Reading the erosion page
- Global erosion — cumulative trade erosion across all your cycles.
- Erosion average — the average erosion per trade, also shown as a percentage calculated on 1% of the prop account size.
- Acceptable average — an input that greys out trades falling between 0 and the value you set, so trades with exceptional erosion stand out on the scatter charts.
- Per-cycle erosion — the cumulative friction costs of all trades closed in a given cycle, shown on the cycle detail page.
Erosion is also the reason the projections shown when you configure a cycle are marked as estimates: they do not include erosion, which depends on how you actually trade.