Foundation course in discretionary trading
Trading Costs: Bid-Ask Spreads, Commissions and Slippage
The bid ask spread is the first cost of every trade and the one most traders never count. This course measures it with commissions, slippage, financing and fees, and shows which trading styles survive their costs.
The bid ask spread is the price of trading immediately. The ask is where someone will sell to you now; the bid is where someone will buy from you now. Every trader who crosses it pays it, twice per round trip, and most never write it down.
How much do trading costs really take?
More than most traders think, and in proportion to how often they trade. A cost of a few hundredths of a percent is nothing to an investor and everything to a day trader who trades twenty times a day. The course has you log every cost of your simulated trades for weeks and add it up.
Why do intraday traders care so much about spreads?
Because the moves they aim for are small. If the typical move you capture is a few times the spread, the spread decides whether the style can make money at all. The course teaches you to check this for your own instrument and time of day before you choose a style.
Who is this course for?
Every trader on the trader path. It needs arithmetic, a spreadsheet and patience, and no programming.
What you will be able to do
- Measure the quoted and effective bid-ask spread of an instrument from its quotes.
- Record slippage on your own fills against the price at the moment of decision.
- Calculate the all-in cost of a round trip, including financing and fees.
- Estimate the minimum average gain per trade that a style needs to cover its costs.
Syllabus, module by module
The spread
Bid, ask and mid; quoted versus effective spread; why spreads widen at the open, the close and on news.
Commissions and fees
Per-share, per-trade and zero-commission pricing, exchange and regulatory fees, and what zero commission costs.
Slippage
Decision price, arrival price and fill price; measuring slippage by hand in a journal.
Financing and borrow
Margin interest, overnight financing on CFDs and forex, and the borrow fee on short positions.
Costs by style
Why a scalper and a swing trader face different hurdles, worked through on the same instrument.
How the certificate is earned
Weekly quizzes and two graded problem sets: a cost log of your own simulated trades, and a break-even cost study for one trading style. On a pass you receive the Course certificate in Trading Costs, issued by the Institute with a verification code. Read how certification works.
This course counts toward
- Foundation Certificate in TradingThe first semester of the trader path: a trading course for beginners in eight parts, from how markets and orders work to costs, charts, risk, edge, psychology and the trading journal, with a simulated-account capstone. No previous knowledge and no programming.
- Diploma in Professional TradingThe top credential on the trader path and the Institute's trading certification for people who do not write code. Three semesters, 24 courses and a 160-hour capstone, from a first lesson on how markets work to a six-month simulated trading business reviewed like a desk.
Questions applicants ask
Why does the bid ask spread matter if my broker charges no commission?
Because you still pay it. Buying at the ask and selling at the bid costs the full spread on every round trip, and for a short-term trader it is often the largest cost.
How do I measure slippage without software?
Write down the price when you decide to trade, then the fill price. The difference, signed and averaged over many trades, is your slippage. The course gives a journal template and checks your numbers.