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Trading costs

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What you pay

Trading costs are what you pay to get into a trade, and what you pay to get out. Both sides count. Think of a bus that charges you for the ride into town and the ride home.

The usual pieces are:

• Fees and commission. The broker or exchange charge for the trade. Some platforms split this into maker and taker feesWaiting orders usually pay less than instant ones.: a waiting order that is not filled at once often pays a maker fee; an instant order, including a market orderBuy or sell now at the best available price., often pays a taker fee. Fee levels differ by platform and they change. We do not quote fee numbers. Check the live fee page of the platform you use.
• The spread. The gap between the buy price and the sell price. A market order to buy generally fills at or near the ask. A market order to sell generally fills at or near the bid. So if you buy and sell straight away, you lose the spread.
• Slippage. The gap between the price you wanted and the price you actually got. In a fast or thin market, a stop can fill worse than the price you placed.
• Funding, overnight and swap fees. Extra costs (or sometimes a payment to you) for holding a leveragedBorrowed power: control a big position with little money. or overnight position. On perpetual crypto contracts this is the Funding rate. Names and formulas differ, so check the live page of the platform you use.

Why a tight stop leaves costs a bigger bite

Costs in price terms stay roughly the same from one trade to the next. The spread is still the spread, whether your stop is wide or tight. Your stop can change. With the same account and the same amount you are willing to lose, a smaller stop means a bigger position. A cost that looks small next to a wide stop can eat a large share of the risk when the stop is tight.

The next numbers are an example, not a live market and not a broker quote.

Example: same risk, two stops

Same account: 10,000. Same planned risk: 100. Same planned target: three times the stop (a 1:3 plan). Same example round-trip cost: 5, in the same terms as the stop (fees, spread and slippageGetting a worse price than you expected., in and out). The 5 does not change when the stop gets tighter.

Wide stop: 20 away from entry

If the stop hits, you lose the planned 100 plus the 25 cost: 125. If the target hits, you win the planned 300 minus the 25 cost: 275. So 275 to 125 is 2.2 × risk. The 1:3 plan is already a bit slimmer.

Tight stop: 5 away from entry

Same 100 risk, same cost of 5, same 1:3 plan. Only the stop is tighter, so the position is bigger (100 ÷ 5 = 20). The cost in money is now 5 × 20 = 100, which is the whole planned risk. If the stop hits, you lose 200. If the target hits, you win 200. The 1:3 plan is now 1 × risk. The cost ate the extra reward.

When a plan fails after costs

A rule can look fine before costs and still lose money after them. In our claim tests, that verdict gets this stamp: FAILS AFTER COSTS It means: before costs the rule was zero or better, and it beat random entries, but after costs it lost. See how we test and How to test a trading claim.

This page is the idea, not a test result. We are not reporting that any named rule failed.

A short checklist

• Know your fee schedule, including maker and taker fees if they apply.
• Check the spread at the time you actually trade. Quiet hours can cost more.
• Put costs into your Position sizing and into every Backtest.
• Be careful with very tight stops on high-cost markets. Costs can eat a large share of the risk, or all of it.
• Fewer, better trades often beat a lot of small ones that each pay the ticket.

Related

• Fees and commission
• Bid, ask and spread
• Slippage
• Position sizing
• Risk-reward ratio
• Backtest
• Funding rate
• How to test a trading claim

Sources & studies

1. cftc.gov: Commission
2. Investor.gov (SEC): Types of orders
3. support.kraken.com: Maker/taker fees
4. Investor.gov (SEC): Investor Bulletin – stop, stop-limit and trailing stop orders

RiskCostsBeginner

Last checked: 2026-11-10 · Educational, not financial advice.

Education only, not financial advice. No signals. Backtests are hypothetical: real trading can be worse. Past results don't predict future results.