No matter what’s going on in the market, fees must always be factored into your trading decisions, especially when executing short-term plays that involve relatively small percentage moves. It’s not uncommon for fees to swallow a large portion of your gains, and slippage — the difference between your intended price and the price your order actually executes at — can leave you with little to show for your efforts.

If your trading fees are higher than the profits you’re keeping, the exchange is making more money from your work than you are. If you’re paying so much that you don’t keep any profit at all, you’re basically paying to work for the exchange.

Understanding Gas Fees, Spreads, Charges

If you’re trading on a decentralized exchange, trades will likely require an additional gas fee (a blockchain network usage fee) on top of any trading fees charged by the venue. Gas fees go to miners (on Proof-of-Work chains) or staking validators (on Proof-of-Stake chains), not the exchange, but they can still be expensive during high-traffic periods.

It’s not uncommon for gas fees on networks like Ethereum to exceed the entire value of an individual trade, making them prohibitively expensive. Some exchanges also maintain “spreads” — an artificial gap between real-time buy and sell prices — and can conceal withdrawal fees in the small print.

What Platforms Don’t Always Tell You

Fees, spreads, extra charges, and the asset pairs available can all vary from platform to platform. Look beyond advertising, and read the terms and conditions before signing up. If you’re not happy with the terms, look elsewhere.

How to Avoid This Mistake

  • Use Fee Calculators: Make sure gas fees will not exceed the value of the transaction. Some platforms will warn you; others may not.
  • Check Terms and Conditions: Consider making only small deposits into a new platform first, so you can learn the interface before depositing more funds.
  • Use Limit Orders: On many exchanges, limit order fees are smaller than market order fees because they add liquidity. Limit orders also execute automatically when the specified price is hit.