Flat Dollar

When brokers charge fees on trades, those fees are usually calculated one of two ways. One way is by charging a percentage of the overall trade amount; i.e., a 10% fee on a $100 trade would be ten dollars. The other way is via a flat dollar fee, which is the same regardless of the trade amount. So if our broker charges a flat dollar fee of $5 per trade, we pay $5 per trade, regardless of whether we’re trading five bucks or five million bucks.

Obviously, if we’re only trading five dollars, a flat dollar fee of five dollars isn’t our most economical choice. But if we’re trading a lot more than that in a given transaction, a flat dollar fee might end up saving us a ton of commish over a percentage fee.