You’re right. Currently high frequency trades are penalised by commissions which has a fixed component. I’m still banging my head trying to figure out a simulated tax environment, but I’ll get it done.
The goal is to make it as perfect as it can as an imperfect proxy to investor skill.
Could you explain a bit more? Do you mean that the decision of what to buy and when to buy/sell is informed by the tax consequences? Interested to learn more.
The most obvious one is holding for at least a year to avoid being qualified as short-term capital gains. There are other relevant rules too, for example look up "wash sale rule".
The goal is to make it as perfect as it can as an imperfect proxy to investor skill.