Crypto Trading Fees Explained: How to Minimize Costs
Fees are the silent killer of trading profits. Most traders focus on entries and exits while ignoring the costs that compound against them with every trade. Learn to understand fees deeply—and keep more of what you earn.
thrive.fi- Maker fees (limit orders) cost less than taker fees (market orders). This alone can save 5-8% yearly.
- Fees compound: 50 trades/month at 0.2% round-trip = 12% of capital yearly. Factor this into your strategy.
- Thrive's journal tracks fees so you see their true impact on P&L—not just gross profits, but net.
Why Trading Fees Matter More Than You Think
Most traders dramatically underestimate how much fees cost them. They focus on finding the perfect entry, the perfect exit, the perfect strategy—while ignoring the constant drag of fees on every single trade.
Here's the uncomfortable truth: an active trader making 50 trades per month at 0.2% round-trip fees loses 12% of their capital to fees every year. That's before any losing trades. A strategy that generates 15% annual returns sounds great until you realize a third of it goes to fees.
The traders who compound accounts over years aren't just good at picking trades—they're relentless about minimizing costs. Every basis point saved goes directly to your bottom line.
The True Cost of Trading Fees
Let's look at how fees compound based on trading frequency. These numbers assume 0.1% entry and 0.1% exit fees—typical for many exchanges:
The True Cost of Trading Fees
Assuming 0.1% entry fee + 0.1% exit fee = 0.2% round trip:
At 100 trades/month, you need to generate 24% returns just to break even on fees. Most traders don't realize this.
The implication is clear: trading less often can make you more profitable. A trader who makes 10 high-quality trades per month might outperform one who makes 100 mediocre trades simply due to lower fee burden.
Maker vs Taker Fees Explained
Maker fees apply when you add liquidity to the order book. You "make" the market by placing a limit order that doesn't fill immediately. Your order sits in the book, waiting for someone else to trade against it.
Taker fees apply when you remove liquidity. You "take" from the market by placing a market order or a limit order that fills immediately against existing orders.
Exchanges charge lower maker fees because liquidity providers benefit their platform. On many exchanges, maker fees are 0-0.02% while taker fees are 0.05-0.1%. This difference is enormous over time:
Maker vs Taker: Real Impact
Same 50 trades/month, different order types:
All Taker Orders
0.1% × 50 × 2 = 10% yearly
Market orders, instant fills
All Maker Orders
0.02% × 50 × 2 = 2% yearly
Limit orders, patient execution
Switching from taker to maker orders saves 8% of capital yearly. That's the difference between profitable and unprofitable.
Types of Crypto Trading Fees
Beyond maker/taker fees, several other costs affect your trading profitability:
| Fee Type | Typical Range | How to Minimize |
|---|---|---|
| Maker Fee | 0-0.1% | Always use limit orders |
| Taker Fee | 0.05-0.1% | Avoid market orders when possible |
| Funding Fee | ±0.01% per 8h | Be aware when holding perps overnight |
| Withdrawal Fee | Network dependent | Batch withdrawals, use cheap chains |
| Spread Cost | 0.01-0.5% | Trade liquid pairs only |
| Slippage | 0-2%+ on large orders | Split large orders, use limit orders |
Understanding Funding Fees
Funding fees are unique to perpetual futures contracts. They're payments exchanged between long and short traders every 8 hours (on most exchanges) to keep perpetual prices aligned with spot prices.
When funding is positive, longs pay shorts—this typically happens when the market is bullish and more traders are long. When funding is negative, shorts pay longs—usually during bearish periods when shorts are crowded.
Funding can significantly impact your P&L on longer-term positions. At 0.01% per 8 hours (a common rate), holding a position for a week costs 0.21%. At extreme funding rates (0.1%+ per 8 hours during euphoria or panic), costs can be 2%+ weekly.
Smart traders use funding to their advantage: getting paid to hold positions when funding favors their direction, or avoiding positions when funding costs are extreme.
Hidden Trading Costs
Beyond explicit fees, several hidden costs eat into your returns:
Spread
The gap between bid and ask prices. On less liquid pairs, you might pay 0.5%+ just to enter a position. Always check the spread before trading—it's a cost you pay on every trade.
Slippage
The difference between your expected price and actual execution price. Market orders during volatile moments can slip significantly. Larger orders move the market against you.
Price Impact
On DEXs using AMMs, larger trades have larger price impact. A $100K swap might cost 0.1% in impact while a $1M swap costs 1%+. Split large orders into smaller chunks.
Opportunity Cost
Capital locked as margin can't be used elsewhere. If you're holding 50% of your capital as margin for open positions, you're paying an implicit cost vs using that capital productively.
Fee Reduction Strategies
Implement these strategies systematically to minimize your trading costs:
Use Limit Orders
The single biggest fee saver. Maker fees are 50-100% lower than taker fees on most exchanges. Be patient—place limits and let them fill.
Trade Less Frequently
Fewer trades = fewer fees. Focus on high-quality setups rather than taking every opportunity. Quality over quantity improves both win rate and fee efficiency.
Choose Low-Fee Exchanges
Fee structures vary significantly. Compare exchanges and consolidate volume on platforms with competitive rates for your trading style.
Hold Exchange Tokens
BNB, FTT-like tokens, etc. often provide 20-25% fee discounts. If you trade frequently on one exchange, the token usually pays for itself quickly.
Increase Volume Tier
Most exchanges reduce fees at higher volume tiers. Concentrate trading on one platform to reach better tiers faster.
Use Referral Codes
Many exchanges offer fee rebates through referral programs. Even 5-10% fee reduction compounds significantly over time.
Factoring Fees Into Your Strategy
Your strategy's profitability must account for fees. A strategy that shows 0.3% average profit per trade in backtesting might be unprofitable after 0.2% round-trip fees.
When evaluating any trading approach, calculate:
- Expected profit per trade (win rate × avg win - loss rate × avg loss)
- Minus expected fees per trade (entry fee + exit fee + estimated slippage)
- Equals net expectancy
If net expectancy is negative or barely positive, the strategy isn't worth trading. Sometimes the best optimization is simply trading less frequently—making the same gross profit with fewer trades means higher net profit.
Frequently Asked Questions
What are maker and taker fees?
Maker fees apply when you add liquidity to the order book (limit orders that don't fill immediately). Taker fees apply when you remove liquidity (market orders or limit orders that fill immediately). Maker fees are typically lower (0-0.1%) than taker fees (0.05-0.1%) because you're providing liquidity that benefits the exchange.
What are funding fees?
Funding fees are periodic payments between long and short traders in perpetual futures contracts. They occur every 8 hours on most exchanges and keep perpetual prices aligned with spot. When funding is positive, longs pay shorts. When negative, shorts pay longs. Funding can add up significantly on longer-term positions.
How much do trading fees cost over time?
Fees compound painfully: at 0.1% per trade (0.2% round trip), 100 trades cost 2% of capital. If you make 50 trades per month, that's 12% of your capital yearly just in fees. Active day traders can lose 20-30%+ annually to fees alone. This is why trading less often can actually improve profitability.
How can I reduce trading fees?
Key strategies: (1) Use limit orders to pay maker fees instead of taker, (2) Choose exchanges with competitive fee structures, (3) Hold exchange tokens for fee discounts (often 20-25% off), (4) Increase your volume tier for better rates, (5) Trade less frequently, (6) Use referral codes for fee rebates.
Should I factor fees into my strategy?
Absolutely. A strategy with 0.1% average profit per trade might be unprofitable after 0.2% round-trip fees. Factor fees into all backtesting and expectancy calculations. Sometimes a less frequent trading strategy is more profitable simply due to lower fee burden.
What are hidden trading costs?
Beyond explicit fees, hidden costs include: (1) Spreads—the gap between bid and ask prices, (2) Slippage—price movement between order placement and execution, (3) Funding payments when holding leveraged positions, (4) Opportunity cost of capital locked as margin. These can exceed explicit fees on large orders.
How does Thrive help with fee tracking?
Thrive's journal can track fees on each trade so you see their true impact on profitability. Your dashboard shows net P&L after costs. Understanding your actual fee burden helps you optimize—maybe you need fewer, larger trades instead of many small ones.
Are fees different on decentralized exchanges?
Yes, DEXs have different fee structures. You pay: (1) Swap fees to liquidity providers (usually 0.3%), (2) Network gas fees for on-chain transactions, (3) Price impact on larger trades due to AMM mechanics. Gas fees can be significant on Ethereum but minimal on L2s and alt-L1s.