Lessons › Why traders lose › The costs you never see
World 11 · Why traders lose · lesson 7 · level 1
The costs you never see
Every trade pays a fee, the spread and slippage, win or lose, and the total grows with every trade you make.
In one line
Every trade sends you a bill you never see, and one line of it grows every time you click.
Explained simply
Every trade costs money, even when you win. The fee: a big crypto exchange lists 0.1% each way, so an example $1,000 trade pays $1 in and $1 out. The spread, the gap between the price to buy and the price to sell, puts every trade a little behind. Slippage means your order fills at a worse price than the one you clicked. And the count: 100 round trips, in and out, cost $200 in fees alone. One study found losing traders paid another 28% in costs, on top of their losses.
A worked example
An example $1,000 trade at 0.1% each way: $1 to get in + $1 to get out = $2 per round trip. 10 round trips = $20. 100 round trips = $200. 500 round trips = $1,000, the whole amount, in fees alone, before the spread and slippage.
Mistakes to avoid
- Counting only the price move and forgetting the fee to get in and the fee to get out.
- Sending orders at any price in a fast market, where slippage is worst.
- Trading the same money back and forth all day: fees are paid on every round trip.
- Calling a tiny gain a win before the spread and fees are paid.
Check yourself
An example $1,000 trade pays 0.1% each way. What do fees cost to get in and out once?
$2. $1 to get in plus $1 to get out is $2 for every round trip, win or lose.
What is the spread?
The gap between the buy price and the sell price. You buy at the higher price and sell at the lower one, so every trade starts a little behind.
Your order fills at a worse price than the one you clicked. What is that called?
Slippage. Slippage never arrives as a bill; it just shrinks your result. Fast markets and orders at any price make it worse.
You trade an example $1,000 back and forth 50 times, at 0.1% each way. What do the fees alone cost?
$100. Each round trip costs $2, so 50 of them cost $100, before spread and slippage. At 500, fees take the whole $1,000.
An example $1,000 trade gains $3 before costs. The fee is $1 in and $1 out. What do you keep, before spread and slippage?
$1. $3 − $1 − $1 = $1. Fees took two of your three dollars, and the spread and slippage still come out of the rest.
Goal of this lesson: Add up the fees on an example trade, and see how they grow with every round trip.