What activity costs
Every cost here is charged whether you were right or wrong. Together they set the hurdle you must clear before any skill shows up in the result.
Costs are boring, which is why they are skipped, which is why they end up being the largest single explanation for a poor result. They have one property that makes them different from everything else in this section: they are certain.
The four charges
- Trading feeA percentage of the trade value, on the way in and again on the way out. Rates vary by venue and by volume, and takers pay more than makers — a limit order that waits is generally cheaper than a market order that does not.
- The spreadCrossing from bid to ask. Not itemised anywhere and paid on both sides, so a position begins slightly negative. On thin pairs this is larger than the fee.
- SlippageThe difference between the price you saw and the average you got, when your order was bigger than the top of the book. Grows with size and with urgency.
- FundingOn perpetuals, paid for holding rather than for trading, at intervals set by the venue. Covered in perpetual futures and funding.
Why frequency is the multiplier
A tenth of a per cent per round trip sounds like nothing. Do it two hundred times in a year and roughly a fifth of the account has gone to costs — before you have been right or wrong about anything at all.
That is the hurdle. To break even, a strategy trading that often must produce a return of that size purely to cancel its own operating expense. Trade ten times a year instead and the hurdle is almost nothing.
Costs scale with activity. Skill does not.
Trading twenty times as often multiplies your costs twenty times over. It does not multiply your judgement. This asymmetry is why frequency is expensive even when every individual decision is reasonable.
The hurdle your activity creates
Costs are charged whether you were right or wrong. Together they set the return you must produce before any skill shows up in the result at all.
Costs scale with activity. Judgement does not. Trading twenty times as often multiplies the first number twenty times over and leaves the second one exactly where it was.
The costs that arrive later
Withdrawal and network fees. Moving money off a venue costs something, and on some networks that can be significant relative to a small amount.
Conversion. Trading through a stablecoin or between quote currencies adds a step, and each step has a spread.
Tax. How trading is taxed depends entirely on where you live, and in many places a disposal creates a taxable event even when the proceeds never leave the exchange and are immediately reinvested. That means a year of active trading can generate a liability calculated on hundreds of transactions, independent of whether the account ended up ahead.
We do not give tax advice and this is not it — the rules differ by country and change. The point is structural: the obligation is generated by the activity, not by the profit, and finding that out in April is worse than finding it out now.
Records, from the first trade
Reconstructing a year of trades afterwards is miserable, and sometimes impossible when a venue has changed its export format, restricted your account, or stopped existing. What is worth keeping is unglamorous: date, pair, direction, size, price, fee, and where it happened.
Exchanges provide exports and they are not equally reliable. Downloading yours periodically, rather than trusting that it will be there, costs a few minutes and occasionally saves a great deal.
The same file answers a second question
A complete record is also the only way to know whether your trading actually worked. Memory keeps the good trades and quietly discards the rest; a spreadsheet does not. Most people who believe they are roughly breaking even have never checked.
The honest summary
Before any judgement about direction enters the picture, an active trader starts each year behind by the sum of the four charges above. Everything in this section — sizing, order types, understanding what a stop really does — is about not adding avoidable losses on top of an unavoidable cost.
Which is also the argument for the least exciting conclusion available: fewer, larger, slower decisions face a much smaller hurdle than many fast ones.