Essentially I agree with what you are saying.Originally Posted by ;
The question is how frequently you re-balance your position so that your real net ranking equals your desired web position.
The more common you re-balance the more trading prices in form of commissions, disperse and slippage you incur.
On the opposite side the less frequently you re-balance your internet position the bigger are the volatility in your P/L that's undesirable (such as should you quantify your trading performance using the sharpe ratio, or another step that requires volatility of the equity curve into account, your performance will probably be lower).
Not as granularity in position changes also means that the market noise will have bigger effect on the result - which can also be undesirable, especially in the event that you use some kind of optimization or data mining to adjust the parameters of your egy.
There's also a chance, that you'll have a lost opportunity cost should you re-balance less frequently - such as in the event the rule is that you re-balance only if the discrepancy between actual and desired position is bigger than one lot, than maybe you missed the chance to make some profitable low quantity (lower than one lot) trades.
The purpose is, you need to research how your egies generate signals and should you would like to act on every change in the desired location.
You ought to get a balance between the trading costs incurred by re-balancing and the expenses resulting from not re-balancing should you choose to not re-balance on every desired position change.
Phuuu... I hope I left marginally understandable what I wanted to state