Percentages, basis points, and why +10% then −10% is not zero

Convert between dollars, percent and basis points, and see why a run of returns multiplies rather than adds. Free lesson 11 of 13 in Tickfloor's course, no card needed.

What basis points are, and why they matter

A basis point is a hundredth of a percent. When traders say the spread widened 5 basis points, they mean it moved 0.05%. A 1% move is 100 basis points.

On a A$2,000 trade, a 0.1% fee (10 basis points) costs A$2. It is easy to miss on the confirmation, but it is gone before you trade. Small fees add up fast on bigger positions or frequent trades.

Saying 0.05% out loud is clumsy; five basis points is quicker. A stock at A$50 moving A$0.50 is a 1% move, or 100 basis points. Same thing, different words.

General information only. It doesn't consider your objectives, finances or needs.

Open the full interactive lesson (12 minutes), or see the whole free course.

More free lessons: Indexes, bull markets and bear markets, Liquidity: why some things cost more to trade, What is trading?.