What the calculator measures
An order’s quoted value is its size, not its full execution cost. A buyer may pay more than the midpoint between the bid and ask; a seller may receive less. A sufficiently large order may also move the price while it is being filled. Commission is a separate charge set by the broker.
| Output | What it means |
|---|---|
| Estimated spread (bps) | The estimated difference between bid and ask, relative to their midpoint |
| Half-spread cost | The estimated cost of crossing from the midpoint to one side of the spread |
| Market impact | An estimate of the price movement associated with executing the order |
| Total cost (US$ and bps) | Half-spread cost plus estimated market impact plus commission |
| Participation in daily volume | Estimated shares ordered divided by average daily shares traded |
A basis point (bp) is 0.01%. On a US$10,000 order, 1 bp equals US$1. The calculator expresses costs as estimates relative to the order value; they are not a broker quote or a prediction of the eventual fill.
Inputs and core calculations
Enter the order value in US$ and share price in US$ per share. The calculator uses these to estimate the number of shares: order value ÷ share price. For a real order, shares generally must be rounded to the quantity the broker permits. That can change both the actual order value and its costs.
Average daily volume (ADV) is measured in shares per trading day. Use a recent, representative average rather than confusing it with volume traded so far today. Daily volatility is entered as a percentage, not a dollar amount: 2% means approximately 2% daily price variability under the chosen volatility measure. Commission is the broker charge in US$ for the order.
Participation compares order size with typical daily activity:
Participation in daily volume (%) = (estimated order shares ÷ ADV in shares) × 100.
For a US$10,000 order at US$50 per share, estimated size is 200 shares. If ADV is 100,000 shares, participation is 0.2%. This is a size comparison, not a statement that the order will account for 0.2% of volume during the minutes in which it is executed. Its participation over that shorter interval could be much higher.
How spread and market impact are estimated
The bid-ask spread is the gap between the best displayed buying and selling prices. PreTrAIde uses a liquidity-tier spread estimate with a volatility uplift and a one-tick floor. In plain English, the model starts with a spread associated with the stock’s liquidity, adjusts for volatility and does not estimate a spread smaller than one minimum price increment. The result is an estimate, not a live displayed bid or ask.
For a trade measured against the bid-ask midpoint, crossing the full spread generally costs about half the spread: a market buy reaches toward the ask, while a market sell reaches toward the bid. The calculator accounts for the order’s participation in daily volume when estimating spread-related cost. Its half-spread output therefore need not equal exactly half of the displayed estimated spread in bps.
Market impact is distinct from spread. It estimates the effect an order’s own execution may have on its fill price, particularly when the order is large relative to available liquidity. PreTrAIde uses an Almgren-Chriss-style impact estimate. Order size relative to volume and volatility help describe the conditions under which impact may rise; the realized result also depends on factors a simple calculator cannot know in advance, including order timing, available depth, other trading activity and how the order is executed.
Spread and impact are modeled components, not separate charges collected by an exchange. Commission is a monetary broker charge. The calculator adds all three to present a comparable estimate:
Total estimated cost (US$) = half-spread cost + market impact cost + commission.
Total estimated cost (bps) = (total estimated cost in US$ ÷ order value in US$) × 10,000.
These figures exclude costs not represented by the inputs, such as applicable taxes or other broker fees. They also do not measure price changes unrelated to the order while an investor waits to trade.
Worked example: a hypothetical US$10,000 order
Suppose an investor enters a US$10,000 order value, US$50 share price, 100,000 shares of ADV, 2% daily volatility and US$2 commission. The estimated order is 200 shares, or 0.2% of ADV.
For illustration only, assume the calculator’s modeled outputs for these inputs are a 10 bp estimated spread, 6 bp participation-adjusted half-spread cost and 3 bp market impact. These assumed outputs demonstrate the arithmetic; they are not a published quote or a universal result of those inputs.
| Component | Illustrative bps | Cost on US$10,000 |
|---|---|---|
| Estimated spread, for reference | 10 bps | Not added in full |
| Participation-adjusted half-spread | 6 bps | US$6 |
| Market impact | 3 bps | US$3 |
| Commission | 2 bps | US$2 |
| Total estimated cost | 11 bps | US$11 |
The commission conversion is US$2 ÷ US$10,000 × 10,000 = 2 bps. The total is US$6 + US$3 + US$2 = US$11, or 11 bps. Do not add the full 10 bp spread on top: that would double-count the spread-related component.
Ways execution choices can affect cost
- Compare size with volume. A larger order relative to ADV can face greater execution difficulty. Splitting an order may change how it interacts with available liquidity, although it can also take longer and does not guarantee a lower total cost.
- Understand limit orders. A limit order sets a worst acceptable price: a maximum for a buy or a minimum for a sell. It can avoid crossing to a worse price, but it might fill only partly or not at all. A non-fill has a cost of its own if the investor still wants the trade.
- Consider the time of day. The market open can involve wider spreads and faster price changes. Waiting for conditions to settle may change execution conditions, but later prices and liquidity are uncertain too.
- Check the actual quote and broker charges. A modeled spread and an entered commission are no substitute for the current bid and ask, the broker’s fee schedule and the order preview.
What the estimate cannot tell you
The calculator is a pre-trade analysis aid, not an execution guarantee. An actual fill may differ because displayed liquidity changes, an order receives price improvement, a limit order does not fill, or prices move for reasons unrelated to the trade. Review the broker’s execution report afterward to compare estimated and realized costs on a consistent benchmark, such as the midpoint at the time the order was submitted.
PreTrAIde also provides this trading cost calculator as a free tool on pretraide.com without sign-up. Its broader stock-basket analysis returns decision-support verdicts and execution reasoning before an order is placed; PreTrAIde does not receive, transmit or execute orders. The investor places any trade with their own broker.