Investing term
What is Commission?
The per-trade fee some brokers charge to execute an order.
A commission is a per-trade fee a broker charges to execute your order. It was once standard on every stock trade, but competition has driven commissions on stocks and ETFs to zero at many major brokers. They still appear, though, on options, futures, some mutual funds, and at plenty of brokers outside the commission-free trend.
Where commissions exist, their impact depends entirely on trade size. A flat fee is trivial on a large order and punishing on a small one — the same $5 is 0.1% of a $5,000 trade but 2.5% of a $200 one. For frequent traders and small, regular contributions, commissions are a guaranteed cost paid whether the trade works out or not, and they add up fast.
A $5 commission is 0.1% of a $5,000 trade but 2.5% of a $200 one. Where commissions exist, small and frequent trades lose the most — batch them, or use a commission-free broker.
For example
A $5 commission on a $200 trade is a 2.5% cost before the investment does anything — trivial on a large order, punishing on a small one.
Learn it by doing
That's Commission in theory — it clicks when you use it. Practise it hands-on in a free, interactive lesson (Stage 7, Brokers, Accounts & Getting Started).
Try the free lesson →Why it matters to you
Commissions matter because they're a certain cost that scales badly with small, frequent trading — exactly the pattern of a regular investor drip-feeding modest amounts. A commission that's negligible on a big trade can quietly tax a small monthly contribution. Understanding how a flat fee bites small orders is what pushes investors toward commission-free brokers, or toward fewer, larger trades, so more of each contribution actually gets invested.
⚠ Small, frequent trades eaten by flat fees
A flat commission is brutal on small orders. Investing $100 a week through a broker charging $5 a trade loses 5% to commission before anything happens — a huge, self-inflicted drag. Where commissions exist, batch contributions into larger, less frequent trades, or use a commission-free broker, so the fee doesn't dwarf the investment.