Market basics

Fees and what they really cost: the arithmetic of a round trip

Fees are the only number in trading that is certain, charged every single time, and read once and then forgotten. The arithmetic takes four minutes and it changes which ideas are worth having.

About 11 minutes to read. Free, no account.

Maker, taker, and why they differ

An exchange charges you differently depending on whether your order was waiting in the book or arrived and consumed something that was. The waiting side is the maker; the arriving side is the taker. Takers pay more, usually two or three times more, because the book is the product and resting orders are what fills it.

Typical published numbers for crypto derivatives sit near 0.02% maker and 0.05% taker, with tiers that reduce both as monthly volume rises. Spot fees are often higher. Those are the figures used throughout this lesson, and you should replace them with your exchange’s own - the arithmetic is the lesson, not the rate.

A round trip costs twice, and you need a move to cover it

Every position is two trades: one to open and one to close. So the fee you care about is the round trip, and the honest question is what price move brings you back to where you started.

Break-even on one coin, taker both ways

buy 1 unit at           100.00
taker fee in   100.00 x 0.0005  =   0.05
total paid                         100.05

sell at price S, fee out is 0.0005 x S
you keep  S x (1 - 0.0005)  =  0.9995 S

break even when  0.9995 S  =  100.05
S  =  100.05 / 0.9995   =  100.1001

so you need about  +0.10%  to come out level

Two taker fees of 0.05% cost you a 0.10% move, which is exactly what you would expect, and it is worth seeing the division once so you trust it. Now add the spread from what a price actually is: if you also crossed a 0.20% spread going in and out, the move you need is about 0.30%, and the market has to deliver that before anything you did was worth doing.

Leverage multiplies the fee, not just the profit and loss

This is the part that is almost never spelled out. Because fees are charged on notional and your account is sized in margin, raising leverage raises the fee in account terms by the same multiple it raises everything else.

The same round trip, measured against the margin

margin                  1,000
notional                5,000      (leverage 5)

taker in    5,000 x 0.0005   =  2.50
taker out   5,000 x 0.0005   =  2.50
round trip                      5.00

as % of notional   5.00 / 5,000  =  0.10%
as % of margin     5.00 / 1,000  =  0.50%

The same trade costs a tenth of a percent of the position and half a percent of your money. Do a hundred of them in a month and the arithmetic is 100 x 0.50% = 50% of the margin paid in fees, whatever the market did. Nothing about that is hidden; it is a multiplication nobody performs.

Which is why the rule about leverage in this school is always the same: here is the arithmetic, the number is yours. See spot, futures and perpetuals for where the ratio comes from.

The full cost of a position, with everything in it

Four costs attach to a leveraged round trip, and only one of them is called a fee. Here they all are on a three-day perpetual position.

Three days in a perpetual, all costs

notional 5,000, margin 1,000, taker both ways

taker in          5,000 x 0.0005          =  2.50
taker out         5,000 x 0.0005          =  2.50
funding  0.01% x 9 settlements (3 days)
                  5,000 x 0.0009          =  4.50
spread crossed twice, 0.02% of notional
                  5,000 x 0.0002          =  1.00
                                            -----
total                                       10.50

as % of notional  10.50 / 5,000   =  0.21%
as % of margin    10.50 / 1,000   =  1.05%

The headline fee was 0.05% and the real bill was 0.21% of the position. Funding was the largest single line, and it was the one that had nothing to do with being right or wrong - it was rent for three days.

Why a small edge dies

Now put the two things side by side. Suppose some rule you have produces an average result, before costs, of +0.05% of notional per trade. That is a perfectly respectable thing for a rule to do.

A hypothetical edge against a real cost

average result before costs    +0.05%  of notional
round-trip cost                -0.10%  of notional
net per trade                  -0.05%  of notional

over 200 trades  200 x -0.05%  =  -10% of notional

the rule was right about the market and lost anyway

Nothing in that example is unusual, and it explains more failed strategies than any indicator does. Costs are deterministic and edges are not, so cost is the first thing that should be subtracted and the last thing anybody remembers to subtract. A rule that is only slightly better than random is, after costs, worse than not trading.

The same arithmetic run backwards is a useful filter: given your costs, how large does the average move have to be for the idea to survive? If the answer is larger than the thing you are trying to capture, the idea is finished before you test it, and you have saved yourself the test.

What a fee schedule does not tell you

Slippage is not on it. It is not a fee, it is not itemised, and it comes out of the same account. See liquidity and depth.
Your tier is not the headline tier. Published rates usually describe the volume band most readers are not in, and some venues advertise a maker rebate that only applies well up the table.
Funding is not a fee at all. It is a payment to the other side of your trade, it changes every settlement, and it can pay you - a short in an overheated market collects it.
Withdrawals, conversions and network costs sit outside the schedule. Moving money is its own expense, and converting between quote currencies has a spread of its own.
A promotional zero-fee market is not free. The cost has moved into the spread or the book depth, where it is not itemised and therefore not counted.

Add the lines up once, for your exchange, at your size, and keep the number. It is the single cheapest piece of homework in trading and the one that quietly decides which ideas were ever possible.

The terms, defined

Maker fee: Charged when your resting order is filled by somebody else. The lower of the two rates, because resting orders are what makes a market.
Taker fee: Charged when your order consumes a resting one. The higher rate, and the one a market order always pays.
Round trip: Opening and closing one position: two fees, two spread crossings, and any funding in between.
Break-even move: The price move needed to cover the costs of a round trip before any result exists at all.
Notional: The full position size that fees and funding are charged on, as opposed to the margin you posted.
Fee tier: A volume band that sets your actual rates. The advertised numbers usually belong to a band, not to you.
Rebate: A negative maker fee some venues pay at high volume tiers. Worth knowing exists, and rarely worth planning around.
Turnover: Total notional traded over a period. Fees scale with this, which is why frequency is itself a cost.

What this means in practice

Write down your own maker and taker rates, from your own exchange, at your own tier. Published headline numbers are usually somebody else’s.
Always price a round trip, never a single side.
Express the cost twice: as a percent of notional and as a percent of the money you posted. The second number is the one your account feels.
Add funding for your intended holding period before you open a perpetual, because it accrues whether you are right or wrong.
Before testing any idea, work out the move it has to produce just to cover costs. Some ideas end there, which is a result worth having cheaply.
Count slippage with the fees even though nobody bills you for it separately.

Nothing in this lesson is financial advice or an instruction to trade. See the risk disclaimer. We never recommend a leverage setting - that decision is yours.