Commission
What is a commission in Trading?
Commission (or forex commission, forex trading commission) is like a small service charge you pay to the forex broker every time you open or close a trade. Think of it as a fee for the broker’s help in carrying out your trade.
Commission Types and How They’re Charged
In Forex trading, commission is simply the cost of placing a trade, but the way it’s charged can vary. Here are the main types, along with how they work:
- Fixed or Flat Commission: A set fee you pay each time, no matter how big or small your position is. For example, a broker might charge $5 each time you open or close a position.
- Commission per Lot: You pay a fixed amount for every lot you trade. For instance, $7 per lot (round trip) when you open and close a Forex position.
- Percentage-Based Commission: Here, the fee is a small percentage of the trade’s total value. For example, a broker may charge 0.04% of the trade value as commission.
- Spread-Only Pricing (No Separate Commission): Some accounts don’t charge a separate commission. Instead, the fee is built into the spread, the difference between the buy and sell price of a currency pair.
Other Glossary Terms
C
- CFD (Contract for Difference)
A CFD is a financial agreement that allows you to speculate on the price movement of assets, such as stocks, currencies, indices, cryptos, or commodities, without owning them.
- Currency Pair
A currency pair in trading shows the price of one currency compared to another.
- Cross-Currency Pair
A cross currency pair is any currency pair that does not include the U.S. Dollar (USD).
- Close Price
Closing price (or close price) is the last price of a CFDs pair when a trading period ends.
- Contract size
Contract size is the amount of a financial asset you are controlling in one trade. In simple words, it tells you “how big” your trade is.
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