A commission is an explicit fee charged by a broker for executing a trade, calculated per share, per contract, or as a percentage of the trade value. Many brokers also apply a minimum charge per order.
How it works
Commission is charged on entry and again on exit, so every round trip pays it twice. Fee schedules may add platform, exchange, or regulatory pass-through fees on top.
Minimum charges matter for small orders: if the minimum is $1 and the percentage fee on your order size is $0.20, you effectively pay five times the headline rate.
Why it matters
Commission is the most visible cost, which makes it the easiest to over-focus on. Spread, slippage, and financing are often larger in total, especially for frequent traders.
Zero-commission pricing removes this line but not the others. The honest comparison between brokers uses total round-trip cost on your own fills.
A simple market example
A broker charges 0.1% with a $1 minimum. A $10,000 trade pays $10. A $500 trade also pays $1 — an effective rate of 0.2%, double the headline. Same schedule, very different real rates.
Common mistakes
Comparing brokers by commission alone while ignoring spread quality and financing rates.
Forgetting that the fee is paid on both entry and exit when calculating whether a setup is worth taking.
Frequently asked questions
Is a lower commission always better?
Not necessarily. A broker with slightly higher commission but tighter fills can be cheaper overall. Compare total round-trip cost, not one line.
What are minimum fees for?
Fixed processing costs exist per order regardless of size. Small accounts feel them most, which is why tiny, frequent orders are structurally expensive.
Do zero-commission brokers earn nothing from trades?
They earn elsewhere: spread differences, order-flow arrangements, financing, and platform fees. The commission line is gone; the economics are not.
Educational content only. Definitions describe common market usage and may vary by jurisdiction, instrument, or institution.