Difference between SPREAD vs COMMISSION
In order to answer this question, you need to first understand the different methods in which Brokers charge fees.
There are typically two types of fees, namely spread and commission. Spreads are calculated into your profit and loss on each trade which means that traders are often unaware of the actual amount. Commission fees are a set amount and can be seen on the traders statement, making this type of setup more transparent to the trader.
Fixed spreads — the simplest model, which seems very novice-friendly, but has its hidden disadvantages. With a fixed spread account, there are no commission fees but typically a rather high spread. During increased volatility in currency rates, a fixed spread will mean requotes if your broker uses instant execution model, and slippage if your broker operates with market execution. In both cases, your trading process will be disrupted, making you miss a trade or land a trade much different from the planned one. Slippage can be significant and you will end up paying far more in fees than you realise.
Variable spreads — this model makes the a bid/ask difference change almost every tick and has no commission fee. It also means that traders will normally experience tighter spreads during periods of calm markets. Unfortunately, it will also result in very wide spreads during high volatility or low liquidity periods. This type of trading fees are well-suited for long-term traders because they have the luxury of less restricted timing for opening their positions.
Commission - typically a zero or raw spread account. Zero-spread accounts, but also ECN accounts with near-zero spreads usually have some sort of commission, which is based on trade volume. This type of fee is preferred by traders who operate during news or periods of low liquidity. Paying commissions protects traders from abnormally wide spreads, requotes and slippage.
Being a Juristic Representative of FSP QuickTrade (PTY) Ltd FSP# 45262, does TenXTrade (PTYP Ltd offer raw spread to our Clients which means that these spreads are extremely tight. There is zero markup on the spread that we receive from our data feed providers. Therefore we charge a set commission fee per instrument in order to generate brokerage. These commissions are cheaper than spread, especially when trading during news or periods of low liquidity.