Trading cost/Transaction cost
Trading costs or transaction costs are all the costs that the trader/investor incurs when transacting on the market, and which are deducted from the sum of money they spend when transacting.
The returns for the trader or investor, are on the sum of money that remains after the transaction costs have been accounted for.
Trading costs comprise explicit costs and implicit costs.
Explicit costs are the direct costs of trading, such as brokerage charges, taxes, stamp duties, and fees paid to the exchanges. The trader may be given a receipt for such costs.
Implicit costs are indirect trading costs. The trader does not get a receipt but has to pay them nevertheless. Implicit costs include the bid ask spread and the impact cost of a trade.