Transaction Cost Analysis

Transaction cost analysis, usually shortened to TCA, is the discipline of measuring what execution cost against a benchmark instead of assuming the quoted spread was the cost. It compares each fill with a reference price — the midpoint when the order was sent, the price at the moment the decision was made, or the volume-weighted average over the order's life — and reports the difference in money or in basis points. Institutions run it routinely because it separates the two things a cost total hides: what the market charged everyone, and what this venue and this order handling charged you. Retail traders hold the raw material for the same exercise in the account statement, and the useful version is simple — record the intended price alongside the fill, group the results by session, instrument and order type, and look for the groups where the gap is systematically worse. The output is not a score but a list of the conditions in which your execution is expensive.