The short version
- The spread is a cost on every trade even when the commission is zero.
- Currency conversion and overnight financing are the charges most often missed, and they grow with every trade or day held.
- Over decades, a fund charge of a fraction of a percent can compound into thousands of dollars on a modest holding.
Trading fees explained properly need more than a list of prices from a tariff sheet. Some costs are charged openly, such as a commission. Others are built into the prices you deal at, taken from a fund's value, or applied when money changes currency. This guide takes each one in turn and puts a number on it, because a cost you can measure is a cost you can compare.
Trading fees explained: visible and built-in costs
| Cost | How it is charged | Where you find it |
|---|---|---|
| Commission | Per trade, flat or percentage | Tariff sheet |
| Spread | Built into the buy and sell prices | Live quotes, execution reports |
| Currency conversion | Percentage on the amount converted | Tariff sheet, often in small print |
| Overnight financing | Daily interest on leveraged positions | Swap or margin rates page |
| Fund ongoing charge | Annual percentage taken from the fund's value | Fund factsheet or key information document |
| Platform or custody fee | Monthly or annual, flat or percentage | Tariff sheet |
| Crypto network fee | Per blockchain transfer | Withdrawal screen |
The spread: a cost even at zero commission
If a share is quoted at $49.98 to sell and $50.02 to buy, the spread is 4 cents. Buy 200 shares and sell them straight back, and you lose 200 × $0.04 = $8 without the price moving at all. In forex, a spread of 1.2 pips on one standard lot of EUR/USD costs 1.2 × $10 = $12. "Commission-free" platforms still earn from spreads, and sometimes from payments made by the market makers that fill your orders.
Currency conversion: the fee on the way in and out
Buying shares listed in another currency means converting money twice: once to buy and once when you sell and bring the proceeds home. Illustration: a 0.5% conversion charge on $2,000 costs $10 each way, or $20 for the round trip, before any change in the exchange rate itself. For a small, frequently traded account, this charge can easily be larger than the commission.
Overnight financing and margin interest
Leveraged positions borrow money, and borrowing costs interest. Forex and CFD providers charge a daily swap; stockbrokers charge margin interest on money lent to buy shares. Illustration: borrowing $10,000 at an annual rate of 8% costs 10,000 × 8% ÷ 365 = about $2.19 a day, or around $65.75 over 30 days. Short-term trades barely notice it; positions held for months pay it every night. See our margin calculator for the collateral side of the same position.
Fund charges and the long run
For long-term investors the most important fee is often the one that is never shown on a statement: the ongoing charge of a fund, deducted from its value every day. The chart below shows $10,000 growing for 20 years at an illustrative 6% a year before costs, with different annual charges taken each year.
A difference that looks like rounding in any one year, 0.70 percentage points, compounds into more than $4,000 on a $10,000 holding. Charges are one of the few parts of investing entirely within your control.
Holding costs: platform and custody fees
Some platforms charge a percentage of the value you hold each year; others charge a flat amount. The better deal depends on the size of your portfolio. Illustration: a 0.25% annual platform fee costs $25 on $10,000 but $100 on $40,000. A flat fee of $60 a year costs the same at every size. The two break even at $60 ÷ 0.25% = $24,000: below that value the percentage fee is cheaper, above it the flat fee wins. Percentage fees also grow automatically as your investments grow, which is easy to overlook in a rising market.
Watch for inactivity fees, charges for transferring holdings to another provider, and paper-statement fees. They are small individually, but they are all avoidable once you know they exist.
Crypto-specific costs
- Maker and taker fees. Exchanges often charge less for orders that add liquidity to the order book (makers) than for orders that take it (takers).
- "Simple buy" spreads. One-tap purchase screens frequently include a wider spread than the exchange's own order book.
- Network fees. Withdrawing coins to a wallet costs a blockchain fee, which varies with the network and how busy it is.
Our crypto profit calculator applies a fee on both the buy and the sell so you can see the combined effect.
A one-page cost check
- Write down how you expect to invest: amount, trades per year, currency, how long you hold.
- Collect the tariff sheet, the fund factsheets and the currency-conversion rate.
- Price one full year of your real pattern, including the round trip on currency.
- Add annual fund charges and any platform fee as money, not percentages.
- Repeat for any alternative, and compare the totals, not the headlines.
The same approach is built into our guide on how to choose a broker.
Reader questions
Are commission-free trades really free?
No. The provider still earns from the spread, currency conversion, financing or payments from market makers. Zero commission removes one cost, not all of them.
What is a good fund charge?
There is no single right number, but broad index funds and ETFs tracking large markets often charge a small fraction of a percent a year. Compare funds that track the same index, because their holdings are almost identical and cost is a large part of the difference.
Why did I pay more than the quoted spread?
Spreads widen when markets are thin or busy, such as at the open, around major news or near the daily forex rollover. The quoted spread is often a typical or minimum figure.