The Trade Behind the Trade

Every trade you make is really two trades. The one you see has an entry, an exit and a profit. The one you do not see has a counterparty called friction, and it takes its share on every round trip, win or lose.

Let us run the numbers on an ordinary month.

A worked example

An active trader takes 100 round trips in a month, each with $20,000 of notional. Their calls are good. Gross profit comes to $2,400. Here is what happens next, using rates that are typical of the sort you might meet. Your own venue and tier will differ.

Item	How it is calculated	Amount
Gross profit	Entries and exits only	+$2,400
Trading fees	0.05% each side, on 100 round trips	-$2,000
Slippage	0.02% each side, on 100 round trips	-$800
Funding	0.01% every 8 hours, for 15 days held	-$90
What was kept		-$490

A trader who was right often enough to make $2,400 finished the month down $490. Their dashboard, if it shows only realized price movement, will happily report a green month.

The toll per trade

Fees and slippage in this example total 0.14% per round trip, or $28 on every $20,000 trade. That is the hurdle. Each trade must earn more than $28 on average before it pays you anything.

This changes how you should read a strategy. A method that averages 0.12% per trade looks profitable in a backtest without costs and loses money in real life. Higher frequency multiplies this effect, because you pay the toll more often while the edge per trade usually shrinks.

Funding, the quiet rent

Funding looks small because it is quoted in tiny increments. At 0.01% every eight hours, it is 0.03% a day, which is roughly 11% of notional a year. If you hold that position at 5x leverage, the same payment is about 55% of your margin a year.

Funding also moves. In a heated market, longs can pay many times that baseline, and a position held for its “long-term thesis” can bleed for weeks while the thesis stays perfectly intact.

What to count

An honest record of a trade includes:

• Fees, maker and taker, on both sides.
• Slippage, as the gap between the price you intended and the average price you got.
• Funding, paid and received, over the whole life of the position.
• Network and bridge costs when you move capital to get into the trade.
• Borrow costs when you use margin.

It also helps to know your cost basis across venues. If you bought on two exchanges and sold on a third, no single venue can tell you what that trade earned. Each one sees only its own fragment.

The weekly reckoning

Take one hour a week and divide your costs by your gross profit. That ratio is the share of your work that goes to someone else. If it is above a third, your first job is not to find better trades. It is to find cheaper ways of making the trades you already have: fewer of them, using limit orders where you can, or moving up a fee tier.

Cutting friction is the rare edge that is entirely yours. Nobody can front-run it, and it keeps working after the signal has gone stale.