Commission

Commission is a fee charged by certain account types on each trade opened or closed, serving as one of the primary methods to cover order execution costs, either in addition to the spread or instead of it.

How It Is Calculated: Commission is typically set as a fixed amount per trading unit (lot) and is deducted when opening the trade, closing it, or across both (round-turn), depending on the specific account policy.

Importance for Traders:

• It represents an essential component of calculating the total cost of any trade.
• It is commonly associated with direct execution accounts (ECN/STP) that offer tighter spreads in exchange for an added commission.
• Understanding it helps in comparing trading costs across different account types.

Common Mistakes:

• Overlooking commission when calculating a trade's net profit or loss.
• Assuming a commission-free account is entirely free of costs, whereas this is often offset by wider spreads.
• Failing to compare the total trading cost (spread + commission) between different account types.

It is always recommended to calculate the total cost of a trade, including commission, before assessing the viability of any trading strategy. How It Applies on the EVEST Platform: The commission rate is clearly displayed within the specifications of each account type on the EVEST platform. It is usually calculated as a fixed fee per contract or specific trade volume, with details appearing in the account statement immediately upon trade execution to ensure complete transparency for the trader.

When Commission-Based Accounts Are Preferred: These accounts are well-suited for active traders who execute a high volume of trades, as they often benefit from tighter spreads in exchange for a transparent commission, making overall costs more predictable and easier to calculate in advance.

Risks: Total trading costs can rise significantly when executing a very high number of small trades without factoring in the accumulation of commissions, particularly in high-frequency trading strategies.

Additional Common Mistakes: Some traders neglect to include commission within their break-even point when setting profit targets, while others compare different accounts solely based on spread without factoring commission into the comprehensive cost comparison.

Relationship with Risk Management: Commission costs must be incorporated into the risk-to-reward ratio calculation for every trade, as accumulated commissions can diminish actual net profits even on winning trades. The calculation tools available on the EVEST platform assist traders in estimating the true cost of each strategy before executing it live.