Commission

Commission is the fee a broker or exchange charges for executing a trade, levied per order, per share or contract, or as a percentage of the position’s value. Together with spread and slippage it makes up transaction costs — the certain, repeated debit that every strategy must out-earn before it can be profitable.

Commissions compound with trade frequency. A cost that rounds to nothing on a single position becomes the dominant line item for a scalping system taking thousands of trades, which is why high-frequency retail strategies so often backtest profitably with zero costs and lose decisively with real ones.

The practical rule: never evaluate a strategy without modeling commissions at your actual rate, and recompute expectancy after costs. A strategy whose average win shrinks by the round-trip fee while its average loss grows by the same amount can flip from positive to negative expectancy with no change in the rules.