Spread, commission and slippage

What it is

The spread is the gap between the bid (the price you can sell at) and the ask (the price you can buy at). You start every trade slightly down by that amount. Commission is a fixed fee per lot or contract that many brokers and all futures exchanges charge.

Slippage is getting filled at a worse price than you asked for. It happens with market and stop orders in fast markets, around news, and at the open.

How to spot it

• Spreads widen when liquidity is thin: overnight, around rollover, and right before and after big news.
• Compare your fill price with the price on your order to see your slippage.

How to use it

• Include costs in your risk and in your results: a strategy with a small edge can be wiped out by them.
• Avoid entering market orders right as high-impact news is released.
• The journal's net P&L includes commission and swap, so you see what really reached your account.

Common mistakes

• Backtesting with zero costs, then wondering why it doesn't work live.
• Scalping tiny targets where the spread is a large share of the move.

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