Commission  

A commission is a fee brokers charge for processing your orders.

Some brokers charge commissions, which are essentially a service fee charged for executing your opening and closing orders. Brokers show commissions in different formats. Some brokers charge per lot, while others charge per million dollars of notional volume.

A lot is a unit of measurement and generally the size of an entire contract of the underlying asset. In forex, a lot is 100,000 units of the base currency. In the trading pair USD/HKD, the notional value of 1 lot is US$100,000. Many brokers let you trade mini lots (0.1 lots or 10,000 units) and micro-lots (0.01 lots or 1,000 units) equal to US$10,000 and US$1,000 notional value.

If you place a trade for 1 lot, and the commission is US$5 per lot, you will pay US$5 for the opening order and US$5 for the closing order. If the commission is expressed as $50 per million, then you’d still pay US$5 for the opening order and US$5 for the closing order.

Suppose you trade a currency pair where the base currency isn’t US dollars. If you place an order for 100,000 GBP/USD and the exchange rate is 1.3775, in this case, the notional value is US$135,775.

Calculation: 1 lot (100,000) of GBP/USD @ 1.3775 = US$135,775 / 1,000,000 * 50 = US$6.79

As you can see, when commissions are charged according to volume, they vary according to the exchange, whereas if commissions are charged per lot, they’re fixed.