> For the complete documentation index, see [llms.txt](https://the-heist-1.gitbook.io/the-heist-docs/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://the-heist-1.gitbook.io/the-heist-docs/how-it-works/trading-and-dynamic-fees.md).

# Phase 3 — Trading & Dynamic Fees

Every LOOT/WETH trade passes through the protocol's own trading pool, which does three things on every single trade: sets the fee, adds an extra cost if LOOT is being sold below target, and records the price that everything else in the protocol reads.

## What a trade actually costs

```mermaid
flowchart TD
    A[Trade submitted] --> B[Fee set before it executes]
    B --> C[0.35% to liquidity providers\n+ 0.15% to protocol liquidity]
    C --> D{Which way, and what price zone?}
    D -->|Buying LOOT, any price| E[No extra cost.\nAbove target: no extra cost either way.]
    D -->|Selling LOOT, 2-10% below target| F[+5% extra]
    D -->|Selling LOOT, more than 10% below| G[+10% extra]
    E & F & G --> H[Trade executes]
    H --> I[Price gets recorded\nfor everything else to read]
    I --> J[The 0.15% -> protocol liquidity]
    I --> K[Any extra cost -> 75% Floor / 25% Treasury]
```

## The complete fee table

| Fee                      | Rate  | When it applies                          | Where it goes                                            |
| ------------------------ | ----- | ---------------------------------------- | -------------------------------------------------------- |
| Base fee                 | 0.35% | Every trade, either direction, any price | Liquidity providers (mostly the protocol's own position) |
| Protocol slice           | 0.15% | Every trade, either direction, any price | The protocol's own liquidity                             |
| Below-target tax, mild   | +5%   | Selling LOOT, 2–10% under target         | 75% Floor / 25% Treasury                                 |
| Below-target tax, severe | +10%  | Selling LOOT, more than 10% under target | 75% Floor / 25% Treasury                                 |

**Buying LOOT never costs extra, at any price.** The base 0.5% (split 0.35%/0.15%) applies the same both ways at every price — it's a restructure of a normal trading fee, not a new cost, and the total cost above target never changes.

**Above target, there's no extra cost of any kind.** The Printer is what captures the upside above target (see [The Peg & The Printer](/the-heist-docs/how-it-works/the-peg-and-the-printer.md)) — trading itself stays as cheap as possible in that zone, on purpose, to encourage volume exactly when the system wants it.

**Below target, selling gets progressively more expensive** the further price drifts. This isn't a punishment — it's friction that makes buying back toward target relatively more attractive than continuing to sell into a dip, pulling in the same direction [the Floor](/the-heist-docs/how-it-works/the-floor.md)'s guarantee already does.

## Why the extra cost has two tiers instead of one flat rate

A single flat rate would treat a 3% dip the same as a 20% crash. Splitting it into tiers means ordinary price wobbles barely notice the mechanism, while a real, sustained drop meets meaningfully stronger resistance — proportional to how far things have actually drifted.

## How the price gets measured

Every trade updates a rolling average price. This is the number every price-sensitive decision in the protocol reads — the Printer's trigger, this page's own tax tiers, everything. It's deliberately **not** the instant price a single large trade could produce for one moment: an average smooths out momentary noise while still catching real, sustained moves within hours, not days.

## What this money actually funds

The protocol slice and the below-target tax are two of the main engines feeding the rest of the system:

* The protocol slice flows continuously into [**the protocol's own liquidity**](/the-heist-docs/how-it-works/protocol-owned-liquidity.md) — making the pool itself deeper, trade by trade.
* The below-target tax flows mostly into [**the Floor**](/the-heist-docs/how-it-works/the-floor.md) (75%), with the rest to the [**Treasury**](/the-heist-docs/how-it-works/the-treasury.md) (25%) — turning exactly the activity that pushes price down into the fuel that rebuilds confidence in it.

Next: [The Floor](/the-heist-docs/how-it-works/the-floor.md) — where all of this revenue ultimately backs LOOT's cash-out value.


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