Who it's for — For those who make a high number of trades (Scalpers or Day Traders), for whom commissions can be the difference between a profitable or losing month.
Commissions (or Fees) are the explicit cost charged by the broker or exchange to allow you to make a transaction. Market infrastructure is not free, and this is the highway "toll" to buy or sell.
In modern trading (especially crypto), the most common commission model is the Maker / Taker system.
In simple terms — You enter a trade hoping to earn $10. The broker takes $1 at entry and $1 at exit. Your trade must make at least +$2 just to break even. Commissions are the constant headwind against which every trader sails.
Maker vs Taker
The broker wants to encourage Liquidity to make its market attractive. Therefore, it discriminates users based on the type of order:
- Maker Fee: Applies when you place a Limit Order that is not executed immediately. Your order ends up on the Order Book, making liquidity for others. Maker fees are very low, or even zero. In rare cases, the exchange pays you (rebate) to be a Maker.
- Taker Fee: Applies when you launch a Market Order or Stop Order. Your order is executed immediately, taking liquidity from the book. Since you are draining market liquidity, Taker fees are higher.
The impact on Leverage
Warning: commissions are calculated on the Notional Value of the entire position, not on the Margin. If you have $1,000 and use 10x Leverage, you pay commissions on $10,000. This means using extremely high leverage decimates your real margin just through entry and exit fees.
Summary Sheet
- Maker: Uses Limit orders (costs less).
- Taker: Uses Market/Stop orders (costs more).
- Calculation: Paid on the total Size moved (Leverage included), both on opening and closing.
Links
- Spread — The "implicit" cost, adding to the explicit commission cost.
- Funding — Another type of cost (or revenue) for holding positions open.
- bronze-path
Module: Module 3 — Orders and Operations
Know what happens when you click buy or sell.
