In trading and investment, a commission refers to a fee charged by a broker or other financial institution on a trade or providing other financial services. Commission may be charged for a variety of trade execution in a variety of financial markets, including stocks, bonds, currencies, commodities, and derivatives.
Brokers charge commissions as compensation for their services and to cover their operational expenses, such as research and analysis, technology, and market data. The actual cost may be a fixed amount per trade, or it may be a sliding scale, based on a percentage of the value of the transaction.
The amount of commission can vary widely between brokers. Typically, a commission is calculated based on the type of asset being traded and the size of the transaction.
For example, a broker may charge a commission of $5 per stock trade executed, or it may charge a commission of 0.1% of the value of a forex trade. Some brokers may also offer tiered commission structures, where the commission rate decreases as the size of the trade increases. This is especially useful for high-frequency traders and high-net-worth investors who make many trades or very large trades.
It is vital that a trader understands the commission structure of their chosen broker so that they can accurately calculate the amount it would cost them to execute their trades. This can help them assess their trading performance correctly.
ADSS offers a range of global markets for traders, with opportunities in indices, commodities, forex, equities and more. We also feature tutorials, how-to guides, and weekly webinars to help you navigate the financial markets and find better trading opportunities. You can start trading and investing online by opening a live trading or demo trading account.