What is Transaction costs?
Transaction costs are everything a trade costs beyond the price move itself: commissions and exchange fees, the bid-ask spread you cross, and slippage when a fill comes in worse than the quote. They are paid on every entry and every exit, so a round trip pays them twice.
Why Transaction costs matters
A small cost on every trade can turn a strategy with a thin positive edge into one that loses money.
Related terms
Lessons that use this term
- Backtest transaction costs: commissions, spread and slippage
- Reading results 2: expectancy and profit factor
- Fees, commissions, and the real cost of trading
- Slippage and why fills differ from the price you saw