Commission is a fee charged by brokers or financial intermediaries for executing trades on behalf of clients. Commissions can be structured as fixed amounts per trade, percentage of trade value, or tiered pricing based on trading volume. This fee compensates brokers for order execution services, market access, and platform maintenance.

Commission structures vary significantly across different brokers and asset classes. Some brokers offer zero-commission trading for certain instruments while generating revenue through spreads or payment for order flow. Traders must factor commission costs into their trading strategies, as frequent trading with high commissions can significantly impact profitability, especially for smaller position sizes.

Real-world example: A stock trader pays $5 commission per trade with their broker, meaning a round-trip trade (buy and sell) costs $10, requiring the stock to move enough to cover this cost plus generate profit.