Risk Management
Commission — Definition & Example
The fee charged by the broker for executing a trade — a direct cost that compounds over high-frequency trading.
Commissions vary widely: zero-commission US brokers (Robinhood) make money on payment-for-order-flow instead of charging direct fees; flat-fee Indian discount brokers charge ₹20 per executed F&O order regardless of size. For active traders, commissions can become a significant drag — 100 trades per month at ₹40 round-trip = ₹4,000/month, or ₹48,000/year. Always factor commissions into expectancy calculations.
Example
Trading 5 round-trip F&O lots per day at ₹40 commission per round-trip = ₹200/day or roughly ₹50,000/year. A strategy with ₹1L/year gross profit is actually a ₹50K net strategy — change the assumption and the strategy may no longer be viable.
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