Spreads, Fees, and Slippage: Calculate the Cost of a Trade

A correct direction can still produce a loss

The market can move in the direction you expected while the trade loses money after costs. A small target leaves less room for the spread, fees, and imperfect fills. Calculate the result from the prices you can actually trade, not just the distance between two marks on a chart.

The examples here use a linear instrument worth one currency unit per price point per unit held. Quotes and charges are invented. Gold contracts, forex lots, and crypto products have their own unit values and fee schedules.

Separate three different costs

Term	Meaning	Where it enters the calculation
Spread	The difference between the best displayed bid and ask	Usually already included when using bid/ask fills
Commission or trading fee	A separate charge for execution	Add the actual entry and exit charges
Slippage	The difference between a stated reference price and the fill	Already included if the calculation uses the actual fill

Slippage can be favorable or unfavorable. A quoted spread can widen, and displayed quantity may be insufficient for the whole order. CME explains the relationship between available liquidity and trading immediately in Liquidity and Immediacy.

Calculate a complete round trip

Suppose the market is 100.0 bid / 100.2 ask. A 20-unit market buy fills at 100.2. Later, the quote becomes 100.5 bid / 100.7 ask and the position is sold at 100.5.

Component	Calculation	Amount
Gross result from fills	20 × (100.5 − 100.2)	+6.00
Entry fee	20 × 0.05	−1.00
Exit fee	20 × 0.05	−1.00
Net result	6.00 − 1.00 − 1.00	+4.00

The bid rose 0.5, but the gross gain per unit was only 0.3 because the purchase crossed the initial spread. Do not subtract that spread again from the 6.00 gross result.

If the sale slips from the expected bid of 100.5 to 100.4, the gross result becomes 4.00 and the net becomes 2.00. Once 100.4 is used as the fill, do not subtract the same 0.1 of slippage a second time.

Find the break-even exit

For the original 100.2 entry with total fees of 0.10 per unit, a sale at 100.3 covers the assumed charges. Selling at the entry price would still lose the fees.

This simplified break-even level changes with minimum commissions, percentage fees, financing, currency conversion, or further slippage. Some contracts have nonlinear payoffs and need a different calculation. The CME futures glossary helps distinguish contract units from price changes.

Apply costs before selecting a target

Suppose the next resistance leaves only 0.15 points above the expected entry. If estimated round-trip fees alone are 0.10 per unit, most of that space is already consumed. A larger-looking candle does not change the nearby obstacle.

For gold or forex products, establish whether a quoted charge is per lot, per unit, or per side. For crypto, distinguish maker/taker execution fees from any applicable funding. Intraday positions may still cross a financing or funding timestamp; the exact rules belong to the provider's specification.

Keep gross price movement, separate charges, and net outcome visible in the same calculation. The reward, risk, and expectancy guide shows why costs matter even when a setup has an attractive target.