You are looking for a low cost stock trading opportunity? Here you will get the answers.
Before you start, you should be aware what costs will arise and how they affect your success.
There are 3 kinds of cost:
- Trading cost
- Additional cost
- Strategy cost
Okay, let´s take a closer look:
This is the cost you might think first:
Commissions you have to pay for trading. There are a lot of price models outside and you have to decide which one fits best with your trading style.
For example: You can pay per share 0.01 US$ or 5 US$ per trade. What is cheaper depends on your volume.
Let´s assume you trade 100 shares:
a) Cost per share: 0.01 * 100 shares = 1 US$ cost
b) Cost per trade: 5 US$
As you can see in this example it is cheaper to choose the cost per trade if you usually trade more than 500 shares.
Sometimes you have to pay some fees. Sometimes for the broker, the exchange or whatever. Usually this is a fixed amount per trade but it can be different at different exchanges. You have to check this out.
Slippage is mostly overlooked by the beginner. Slippage occurs when you try to enter or close a trade. Let´s say you want to buy a stock at 50.59. You sent the order and get a fill at 50.60. In this case you have a slippage of 0.01 US$ per share. Sometimes the slippage can be higher, sometimes lower or even in your favour. But to be honest: This is very, very rare.
These payments are also overlooked, because the people argue, that they have these things anyway. This might be true, but you use them more often and this will devalue them. Furthermore you recognize, that the actual model or size does not fit to your increased needs and that you have to buy a new, better and expensive model.
Here you get some ideas:
- Computer (faster, bigger screen)
- Internet connection (faster, more reliable, more bandwidth)
- Energy & time (Your time and energy for reading [here] and searching)
- Experience (see next point)
Before you can start trading you have to have a strategy. This contains amoung other points:
- What to trade?
These two points influence the cost of trading. Why?
What to trade?
You looked for low cost stock trading. Does this mean cheap stocks, penny stocks? Or does it mean, that you want to control your trading cost, which is by the way the better approach.
If you want to trade penny stocks, take a look at my blog about “Penny stock trading tips – tricks and traps“.
At what exchange do you want to trade? Do you want to trade on the NASDAQ or at the NYSE`Or do you want to trade overseas? In this case you normally face additional cost and in general the exchanges outside the United States are expensive.
This is a crucial point of your trading style and the cost. If you decide to trade long term, i.e. for weeks, month or even years, than the trading cost doesn´t matter, because you trade very seldom. That´s why you seldom have to pay these costs.
If you trade a shorter timeframe or Intraday (daytrading), than the trading cost become a crucial part of your trading. For further information please read this article: “Check out whether you have good strategy or not!”
What is still missing is the real strategy.
I you have to know exactly,
- what to buy,
- how much and
- when to exit.
To develop a real good trading strategy needs time and effort. Depending on your preferences you can use recommendations or strategies from other people. In another article I cover this topic too.
I hope, that you got an idea about the costs, the structure and how it depends on your trading style.
Please leave a comment about your questions and thoughts.