I'm looking to finally start trading real money, and the broker I used to practice NEVER said anything about commission. Whenever I calculated the expected outcomes, commission did not seem to be charged. I used to think commissions are charged off of trades, and if you make less than commission, you are losing. So if you make 5.87 and your commission is 5.95, you are losing the difference. However, this recent event has caused me to wonder. How does commission REALLY get charged? Does it get charged on ONLY the trade you are executing? On your balance? Please clarify!
There are a variety of commission schedule styles. Some brokers charge a flat fee per trade and they are more cost efficient for trading larger blocks of shares. Others charge by the share and this is more cost efficient for smaller trades. Some brokers charge nothing at all for transactions. And then there are those that are a hybrid of both, charging by the round lot (or option contract) with a commission cap and no charge for additional shares/contracts.
The short answer is that if the broker charges a commission, it is added to the your purchase price when you buy and is subtracted from the proceeds when you sell.
The typical brokers, Schwab, Fidelity, etc, charge about $5 on a trade. I buy 100 shares of a $100 stock, and I pay $10,005.
When I sell that same stock a few months later, at $200, I get back $19,995.
Some brokers charge no per trade commission, instead charging an annual fee, or just no cost at all. Your broker must have a document or even event advertisement describing their costs.