The Three Cost Layers
Every trade incurs three types of cost. Exchange fees are explicit and published: maker fees, taker fees, withdrawal fees. Spreads are the implicit cost of crossing from bid to ask when entering and exiting. Slippage is the difference between the price you see and the price you actually get, caused by your order moving the market or by price changes during execution.
Each cost is individually small for liquid assets. Binance charges 0.10% maker/taker on spot. BTC-USDT spreads average 0.0014 basis points. Institutional slippage averages -1 to -2 basis points. But these costs compound across many trades and across both entry and exit.
The Round-Trip Calculation
A single trade involves both entry and exit. If each leg costs 0.10% in fees plus 0.01% in spread plus 0.02% in slippage, the total per-leg cost is 0.13%, and the round-trip cost is 0.26%. Over 200 round-trip trades per year, total costs equal 52% of capital. This means a strategy needs to generate more than 52% gross return annually just to break even.
For less liquid assets, the math is worse. A mid-cap altcoin with 0.10% fees, 0.10% spread, and 0.20% slippage per leg has a round-trip cost of 0.80%. Over 200 trades, that is 160% of capital in costs. No strategy can overcome that.
Cost-Aware Strategy Design
The implication is that strategy turnover (how often you trade) must be calibrated against the cost structure of your target assets. High-turnover strategies only work on the most liquid assets with the tightest spreads. Lower-turnover strategies (weekly or monthly trades) can work on less liquid assets because the per-trade cost is amortized over a longer holding period with a larger expected return.
Before deploying any strategy, calculate the round-trip cost for your specific asset, exchange, and typical order size. If the cost exceeds 30% of the strategy's average winning trade, the strategy is unlikely to be profitable net of costs.