In this article, We learn about "Commission ".Let's Go!
Commission refers to the service fee required by the broker to trade on behalf of the client.
This fee is usually based on the size and type of transaction.
Commission acts as compensation for the time and effort brokers expend to facilitate transactions.
Commissions are structured in many different ways:
- Fixed Fee: The broker charges a fixed amount regardless of the size of the trade. This is common among discount brokerages.
- Trade Percentage: The broker charges a percentage of the total value of the trade. This is more common with full-service brokers who offer additional services such as research, advice, and tax planning.
- per share (or unit): The broker charges a fee per share traded. This is less common, but can occur in some cases, especially with low-cost online brokerages.
- Spreads: Some brokers, especially in Forex trading, make money from spreads, which is the difference between the buying and selling price of a security. They may not charge traditional commissions, but they make money when traders buy at slightly higher ask prices and sell at slightly lower ask prices.
It is important to note that while low commissions may be attractive, they are not the only factor to consider when choosing a broker.
The reliability, trade execution speed, customer service and additional services offered by the broker are also important considerations.