What every trade really costs you

The commission you see on confirmation is only part of it. Added to it are the spread — the gap between buying and selling — slippage, and currency conversion if you trade outside the euro. None of those three appears on the invoice, and together they usually outweigh the commission.

What the spread is and why it's an invisible cost

The spread is the gap between the lowest price someone is selling at and the highest someone is buying at, right now. You pay it every time you trade, it appears on no receipt, and in thinly traded assets it can far exceed the commission.

Why you always pay it, even when it doesn't look like it

In the order book we saw in the first chapter there are two prices at once: one to buy at, and a lower one to sell at. They never coincide.

That means the instant you buy, you're already down. Buy at $50.04 and if you wanted to unwind immediately, you'd sell at $50.00. Four cents per share, without the price moving a millimetre.

On 100 shares that's $4. Against a $1 commission, the spread is four times more expensive and nobody mentioned it.

What makes it wide or narrow

The volume the asset trades. An S&P 500 stock trading millions of shares a day can have a one-cent spread. A small company trading a few thousand can have one of 1% of the price or more.

The time of day. We saw that activity is U-shaped. Outside regular hours, and in the dead middle of the session, the spread widens because fewer people are quoting on both sides.

Volatility. When the price moves fast, whoever quotes both sides takes more risk of getting caught, and compensates by widening the spread. That's why it blows out precisely in the moments of most movement.

The consequence that decides behaviour

The spread is paid per trade, not per euro invested. Someone who buys once and holds for five years pays it twice in total. Someone who buys and sells twice a week pays it two hundred times a year on the same capital.

That's the arithmetic behind much of the data this course opened with: you don't need to be wrong about direction to lose money — trading enough is sufficient.

What order book depth is

Depth measures how much volume waits at each price, not just at the best but at the levels behind it. It determines how much you can buy or sell without moving the price yourself.

The example, level by level

Imagine you want 1,000 shares and the sell side looks like this:

Price	Shares available
$50.00	200
$50.05	150
$50.12	300
$50.30	500

Your order eats all four levels: 200 at $50.00, 150 at $50.05, 300 at $50.12, and 350 at $50.30. Your average purchase price isn't $50.00, it's roughly $50.16.

You paid 16 cents more per share than the screen showed, $160 on the trade, and it wasn't anybody's fault: there simply wasn't enough supply at the first price.

Why this rarely affects you, and when it does

In a highly liquid stock with a normal-sized order, you'll notice nothing: there are thousands of shares at the best price and your order barely scratches the first level.

It becomes relevant in three situations: small, thinly traded assets, orders large relative to the asset's usual volume, and low-activity moments — which tend to be all three at once when it happens.

Liquidity is the sum of the two things above: a tight spread and sufficient depth. A liquid asset can be bought and sold quickly without the price suffering; an illiquid one can't, however identical the commission.

Why you get filled at a different price than you saw

Slippage is the gap between the price you saw when clicking and the actual fill price. It happens because time passes between the two, and in that time the market keeps moving.

It isn't an error, it's market physics

Between seeing a price on screen and your order reaching the book, milliseconds pass, sometimes more. In that window other orders have matched and the best available price is no longer the same.

It barely registers in a liquid stock at a calm moment. It blows out in two specific cases: assets with little depth, where your own order cuts through several levels, and peak volatility moments, like the minutes after major news or an earnings release.

How to eliminate it, and what eliminating it costs

A limit order removes slippage by definition: it either fills at your price or better, or it doesn't fill.

The price of that protection is that it might never fill. It's the same trade-off that appears again and again in this course: certainty of price or certainty of execution, never both. Order types, with their use cases, are laid out in the order types guide.

Commission, custody, and currency conversion

These three do appear somewhere, though not always where you're looking. The commission is the most visible and today usually the smallest; custody has been fading; and currency conversion is, in a portfolio holding US assets, typically the largest of the three.

The per-trade commission

The one everyone compares. With current competition, it's usually €1 or less per trade, sometimes zero on certain products.

The detail that matters isn't the percentage, it's the minimum. A commission of "0.10% with a €1 minimum" on a €100 purchase is 1%, ten times the advertised rate. Buying in small amounts with fixed-minimum commissions is one of the quietest ways to lose returns.

Custody

A fee for holding your securities, whether you trade or not. It's been disappearing at modern brokers, but survives at some and above certain portfolio sizes. Worth checking, because it's the only one of these costs you pay while doing absolutely nothing.

Currency conversion, the most overlooked

If you buy US stocks from a euro account, there's a currency conversion, and that conversion carries its own cost, separate from the trade commission. How much it costs varies enormously from one broker to the next, and there is no market range that can be taken as read: the gap between cheapest and dearest is over an order of magnitude. It is a figure to look up in the specific broker's fee schedule, alongside the commission, before opening the account.

On €1,000 invested, that's between €1.50 and €7.50. A fivefold difference between brokers, on a cost that almost never appears in comparisons.

And one detail multiplies its effect: the conversion is paid twice, on buying and on selling. A €1,000 investment in US stocks with a 0.5% conversion pays €5 going in and €5 coming out. Ten euros on a thousand — 1% of capital — purely for trading in another currency.

Remember too what we saw in the previous chapter: on top of that cost, you're carrying the risk of the exchange rate moving while you hold the position. Two different things, both arriving with the same decision.

What it all adds up to in a year

Let's total the four costs on a concrete, realistic case, because separately they all look small and together they aren't.

The case

Someone invests €500 a month in US stocks, twelve purchases a year, €6,000 in total. They use a broker with a €1 commission per trade and a 0.5% currency conversion. The stocks are liquid, so the spread is tight and slippage small.

Item	Calculation	Annual cost
Commissions	€1 × 12 trades	€12.00
Currency conversion	0.5% × €6,000	€30.00
Spread	~0.05% × €6,000	€3.00
Custody	None at this broker	€0.00
Total		€45.00

Forty-five euros on €6,000 invested: 0.75% of the capital contributed that year, of which the commission — the only thing most people compare — accounts for barely twelve euros.

The two scenarios that change everything

Switching brokers. With a 0.15% conversion instead of 0.5% — two example figures, not a market range — the currency line drops from €30 to €9. Total cost falls from €45 to €24, nearly half, with nothing else changed.

Trading more. Same contributions but buying and selling twice a month instead of buying once: trades go from 12 to 48 a year, conversion is paid entering and exiting, and the total climbs well past €200.

Why this weighs more than it looks

In the previous chapter we saw that fees compound like returns, only subtracting: 1.5% a year turned €76,000 into €50,000 over thirty years.

A 0.75% cost on contributions is less than that, but works identically: it's a certain percentage subtracted every year from a growing balance, against a return that isn't guaranteed. Of all the variables deciding your final outcome, this is one of the few you can fix before starting, which is why it deserves more attention than it gets.

And there's a fifth cost almost nobody counts: tax

The four above are the ones that appear in comparisons. There's a fifth that only shows up the following year and also depends on how much you trade.

Every time you sell at a gain, a tax obligation is created that same year. It isn't a new cost — that gain was going to be taxed sooner or later — but when you pay does matter, because money going to the tax agency stops compounding for you.

Two people with the same gross return end up in different places if one sells and repurchases every six months and the other holds. The first pays tax on gains repeatedly along the way; the second pays once at the end, on capital that grew throughout with the tax agency's share still inside.

That's also where the most important difference between funds and ETFs (exchange-traded funds) in Spain lives, covered in its own section of the taxation guide: switching funds via transfer creates no taxable event, and switching ETFs always does.

Added to everything above, the result is that trading more isn't only more expensive in commission and spread: it also brings the tax bill forward, and that advance compounds against you for every year the investment has left.

And behind all of this sits a gap that isn't about price but about criteria. All these costs are paid per trade. That means the number of decisions you make matters as much as getting them right — and deciding less often is only viable if you know which moments genuinely warrant a decision.

That's Volatly's approach: working on scheduled events — earnings and dividends, a handful per company each year — rather than on a continuous stream of signals. Not because trading rarely is a virtue in itself, but because every trade carries a certain cost, and it's worth knowing which of them had something behind it.

What to remember

• The spread is paid on every trade and appears on no invoice; in illiquid assets it far exceeds the commission.
• A large order in a shallow book fills at a worse average price than the screen showed.
• Currency conversion varies widely by broker and is paid twice, buying and selling: look it up in their fee schedule.
• On €6,000 invested across twelve purchases, realistic total cost lands around 0.75%, with commission the smallest part.

Milestone reached

That closes Chapter 3. You know what every trade costs you and what the tax authorities take before you hit the button: how to check a broker, where your shares are, what FOGAIN covers, and the four costs stacking up on every purchase.

This chapter's two guides are reference material rather than read-throughs: investment taxation in Spain and order types. Come back to them when you need them.

Chapter 4 is the heart of the course: what happens when a company reports earnings, and how to read an event before it happens.

Related: order types and how they execute · investment taxation in Spain · what actually happens when you hit buy