# taker cost

Spread-based warning system that estimates the real cost of immediate trade execution. Based on Becker (2025) methodology.

## What It Is

When you buy at market (taking liquidity), you pay the ask price, not the midpoint. The taker cost is the difference between the midpoint and your execution price.

```
Taker Cost = Ask Price - Midpoint

Where:
  Midpoint = (Best Bid + Best Ask) / 2
```

## Why It Matters

Your theoretical edge (from the composite probability model) is reduced by taker cost. If the model says you have a 5% edge but taker cost is 3%, your real edge is only 2%.

```
Real Edge = Composite Edge - Taker Cost
```

## Warning Levels

| Taker Cost | Level    | Meaning                                       |
| ---------- | -------- | --------------------------------------------- |
| **<1%**    | Low      | Tight spread. Minimal execution cost.         |
| **1-3%**   | Moderate | Normal spread. Factor into sizing.            |
| **3-5%**   | High     | Wide spread. Only trade with strong edge.     |
| **>5%**    | Warning  | Very wide spread. Edge likely erased by cost. |

## Where It Appears

* **Depth Panel (Book tab)**: Shown next to the spread
* **Models Tab**: Displayed alongside Kelly sizing
* **Analysis**: Factored into the intelligence brief

## Interaction with Kelly

The Kelly Criterion uses the midpoint price to calculate position size. Taker cost effectively shifts your entry price away from the midpoint, reducing your realized edge.

Recommendation:

1. Calculate Kelly using the composite probability and midpoint
2. Subtract taker cost from your expected edge
3. If the adjusted edge is marginal (<2%), skip the trade or use a limit order instead

## Reducing Taker Cost

* **Use limit orders**: Place orders at the price you want instead of taking at market
* **Trade liquid markets**: Higher volume markets have tighter spreads
* **Avoid extreme odds**: Markets near 0% or 100% often have wide spreads
* **Time your entry**: Spreads can tighten after active trading periods


---

# Agent Instructions: Querying This Documentation

If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question.

Perform an HTTP GET request on the current page URL with the `ask` query parameter:

```
GET https://yesno-1.gitbook.io/yesno-docs/models/taker-cost.md?ask=<question>
```

The question should be specific, self-contained, and written in natural language.
The response will contain a direct answer to the question and relevant excerpts and sources from the documentation.

Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.