What Are Trading Commissions?
Trading commissions are fees charged by brokers for executing your trades. Every time you buy or sell, you pay a commission—either per share, per contract, or as a spread markup.
These costs add up quickly, especially for active traders.
How Trading Commissions Work
Futures Commissions
Charged per contract, per side (round-turn = entry + exit):
- Discount brokers: $0.50-$1.50 per side
- Full-service brokers: $3-$5+ per side
- Example: 10 ES contracts at $1/side = $20 commission per round-turn
Stock Commissions
Most stock brokers now offer zero-commission trading (Robinhood, Webull, TD Ameritrade). They profit from payment for order flow instead.
Forex Commissions
Forex brokers typically charge via spread (bid-ask difference) rather than direct commissions. Some ECN brokers charge both spread + small commission.
Hidden Costs Beyond Commissions
Commissions aren’t the only trading costs:
- Exchange fees: CME, NFA, routing fees (often included in commission)
- Data fees: Real-time market data subscriptions ($10-50/mo)
- Platform fees: Some brokers charge monthly platform fees
- Slippage: The hidden cost of market orders
According to the SEC, understanding total trading costs is crucial for profitability.
Impact on Trading Strategies
Scalping
High-frequency traders pay thousands in commissions monthly. A $0.50 difference per contract matters when trading 100+ contracts daily.
Swing Trading
Fewer trades = lower commission impact. Holding positions days or weeks means commissions are a smaller percentage of profit.
Prop Firm Evaluations
Prop firms typically charge $3-5 per side. Factor this into your trading plan—a strategy profitable at $1 commissions may fail at $5.
How to Minimize Commission Costs
- Negotiate: High-volume traders can negotiate lower rates
- Trade Less: Quality over quantity reduces costs
- Use Limit Orders: Avoid market orders that pay spread + commission
- Choose the Right Broker: Compare commission structures
Commission-Free Trading: The Catch
“Zero commission” stock trading sounds great, but brokers profit somehow:
- Payment for order flow: Selling your order to market makers
- Wider spreads: You pay via bid-ask instead
- Interest on cash balances: They lend your uninvested cash
Nothing is truly free in trading.
The Bottom Line
Trading commissions are a cost of doing business. Minimize them where possible, but don’t let cheap commissions drive you to a bad broker.
Execution quality, platform reliability, and customer service matter more than saving $0.25 per trade.
Looking for prop firm trading? Check out Elite Trader Funding for futures evaluations. Explore more trading education.