Fees and slippage: the costs that shrink your R:R

The risk-reward ratio you plan is a gross number. The ratio you actually get is net of costs. Four costs sit between your plan and your fill: commissions, the bid-ask spread, exchange and regulatory fees, and slippage. This lesson explains each one and works through how they change the numbers from the risk-reward ratio lesson.

1. Commissions

A commission is what your broker charges to handle a trade. Many US brokers advertise $0 commissions on online stock trades, but options, futures, broker-assisted orders and some account types often carry a per-trade or per-contract fee. The only reliable number is your own broker's current fee schedule. Look it up, and count the commission on both the entry and the exit.

2. The bid-ask spread

At any moment a stock has a bid (the highest price someone will pay) and an ask (the lowest price someone will sell for). Buy at market and you generally pay near the ask. Sell at market and you generally receive near the bid. The SEC's investor site notes that a market order "will execute at or near the current bid (for a sell order) or ask (for a buy order) price" (Investor.gov, Types of Orders). The gap between the two is a cost even when no fee is listed.

The smallest spread a stock priced at $1.00 or more can usually be quoted in is one cent ($0.01). Under SEC Rule 612 as currently amended, some heavily traded stocks qualify for a half-cent ($0.005) increment (17 CFR 242.612). Thinly traded stocks can have spreads far wider than the minimum.

3. Exchange and regulatory fees

Two regulatory fees show up on many US stock sale confirmations. Both apply to sales, not purchases.

• SEC Section 31 fee. For fiscal year 2026 the rate is $20.60 per $1,000,000 of covered sales, effective April 4, 2026 (SEC Fee Rate Advisory 2026-2; Federal Register order, March 4, 2026). The fee is charged to exchanges and FINRA, which typically pass it on through member firms. That's why it can appear on your confirmation.
• FINRA Trading Activity Fee (TAF). FINRA's fee schedule sets the 2026 TAF for covered equity sales at $0.000195 per share, with a maximum of $9.79 per trade, and $0.00329 per contract for options sales (FINRA fee adjustment schedule, SR-FINRA-2024-019). FINRA has temporarily set the TAF to $0.00 for transactions from October 1 to December 31, 2026 (SR-FINRA-2026-021). TAF is assessed on member firms, which may or may not pass it on to customers.

Both amounts are tiny on a single trade. They matter mainly to frequent sellers, and they are a reminder to read your trade confirmations.

4. Slippage

Slippage is the difference between the price you expected and the price you got. A market order "guarantees that the order will be executed, but does not guarantee the execution price" (Investor.gov). Fast markets, thin order books, gaps at the open, and stop orders that become market orders can all leave you filled worse than planned. Slippage is often the largest of the four costs, and the hardest to predict. The SEC also explains that brokers route orders in different ways that affect execution quality (SEC, Trade Execution).

Worked example A (hypothetical)

*All numbers are invented for illustration. Your broker's fees and your fills will differ.*

• Plan: buy 200 shares at $50.00, stop at $49.00, target at $53.00.
• Gross: risk $1.00 × 200 = $200, reward $3.00 × 200 = $600, so 1:3.
• Assumed costs: $1.00 commission per side, $0.02 per share of combined spread and slippage on each side ($4 per side), plus the Section 31 fee on the sale. The TAF is $0.00 in this example because of the October–December 2026 waiver.

Net reward-to-risk: 589.78 ÷ 210.20 ≈ 1:2.81, down from 1:3. Break-even win rate (1 ÷ (1 + R)): 25.0% gross, but about 26.3% net.

Worked example B (hypothetical): tight stops feel costs more

• Plan: buy 1,000 shares at $10.00, stop at $9.90, target at $10.30. Gross risk is $100 and gross reward $300, so 1:3 again.
• Same assumed costs per side: $1.00 commission and $0.01 per share of spread and slippage ($10 per side), plus Section 31 on the sale.
• Net loss at the stop is about −$122.20, and net gain at the target is about +$277.79.
• Net ratio is about 1:2.27, and the break-even win rate rises from 25% to about 30.6%.

The fixed cents per share are the same size as in example A, but the stop is only 10 cents away, so costs eat a much bigger share of the planned risk. That's the main takeaway: the tighter the stop relative to the spread and slippage, the more costs matter.

Using the calculators with costs in mind

• Position size calculator: if you want a fixed dollar risk per trade, you can add your expected per-share costs to the stop distance before sizing. The share count comes out a little smaller, and the actual dollar loss stays closer to your plan.
• Expected value calculator: enter your net average win and loss rather than your planned ones. A strategy can look positive on gross numbers and break even, or worse, once costs are included.
• Risk-reward ratio: recompute the ratio using net reward ÷ net risk, as in the tables above.

Track your real costs

Estimates are a starting point. The way to know your actual slippage and fees is to log fills and compare them with your planned entries and exits. See Charting and trade journaling for how traders review this.

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Key points

• Planned R:R is gross. Your results are net of commissions, spread, fees and slippage.
• Section 31 and FINRA TAF apply to sales and are small per trade. Check your confirmations for what's actually passed through.
• Slippage and spread usually cost more than the listed fees, especially with tight stops.
• Use net numbers in the calculators.

Fee rates change. Check the linked sources and your broker's fee schedule for current figures.