Commission is the fee a broker charges for executing your trade. Understanding commission structures is essential for calculating your true trading costs.

Commission Structures

1. Spread-Only (Market Makers)

  • No separate commission
  • Cost is built into the spread
  • EUR/USD spread: 1.0-1.5 pips typical

2. Commission + Raw Spread (ECN)

  • Tight spreads (0.0-0.5 pips)
  • $3-7 per lot per side ($6-14 round trip)
  • Lower total cost for active traders

3. Percentage-Based

  • Common for stock CFDs
  • 0.1% - 0.5% of trade value

Calculating Total Cost

Trade: Buy 1 lot EUR/USD (100,000 units)

  • Spread cost: 1.2 pips × $10 = $12
  • Commission: $6 round trip
  • Total cost: $18

Key Points

  • Always calculate total cost (spread + commission)
  • Lower commission ≠ lower cost (check spreads too)
  • Some brokers offer commission-free trading but wider spreads