Comments on: Why Are You Paying More?

by: TraderSteve

Tue, 16 Jan 2007 21:32:11 +0000

I’m only 25 but really into trading tech stocks. As I have a long way to go to establish a proper portfolio i’ve chosen sharebuilder. I can do 4$ trades but what i like the most is i’m not limited to buying entire shares, so lets say i have 50$ to spend to buy a share of oh say ibm (not really) it would be around 80+$ normally. well i can get a percentage of that share minus the 4$ fee of course. Yet if i buy multiple shares at a time say a little ibm, some apple, some amd, ect ect i’m still only paying 4$ TOTAL not per trade. This mind you is done automatically every tuesday when the market opens. Not a real time trade (although they do have that aswell). For my income and money its hands down the best long term investment tool.

by: homeimprovementninja

Tue, 16 Jan 2007 21:20:23 +0000

I have Scottrade, at $7 a trade they are hard to beat. I found out recently that Bank or America offers $5 trades, or free trades if you have $25k in a savings account. I don’t trade excessively, but why pay more for the same service?

by: Christian Gross

Tue, 16 Jan 2007 18:23:28 +0000

Ooops put foot back in mouth…

Sorry…

by: crni

Tue, 16 Jan 2007 16:40:01 +0000

That’s all fine and good, and I actually agree with you. That is why I wrote about investors investing less than $5K, which is the minimum to start an account with Interactive Brokers.

by: Christian Gross

Tue, 16 Jan 2007 16:15:23 +0000

Thanks for the comments, but I completely disagree that “once you have enough money commissions don’t matter.”

If you follow Cramers advice then you nibble and buy shares, and slowly sell shares. I myself am trying to be delta neutral and I often buy and sell shares. I regularly buy blocks of 100 to 500 shares, but buy them in intervals.

I pay about 0.005 to 0.01 per share premium. With etrade to get the same leverage I would have to trade in 800 share blocks or about 30,000 to 80,000 USD. That is completely nuts!

If I deal in 200 shares at a time I would need an 8 cent difference before I make any money. Whereas with IB I need an 2 cent difference. And I have found time and time again when cutting losses a 2 cent difference helps minimize losses.

by: crni

Tue, 16 Jan 2007 15:30:30 +0000

If I read the Zecco faq correctly, they do not mess with the spread, since they are not a market maker.

http://www.zecco.com/trading/.aspx?tab=FAQ

I do agree with what you said about their margin rates, however one has to keep in mind that most discount brokers have such margin rates.

The bottom line is, if you have enough capital that the comission does not bother you, you go ahead and look at “advanced” things like cash interest and margin rates. If you are just starting out and have less than $5K invested, you need to worry about the comission cost. Unless of course you are trading very few stocks with that money.

by: Jason

Mon, 15 Jan 2007 22:40:36 +0000

Christian, thanks for the article. I should check out Interactive Brokers.

As to why I pay more for E*Trade… I like their interface and customer support (so far). I like their charting tools.

Umm… of course I could keep my account there with a minimum and do my trading through another broker. Could be worth it.

Why not save $100-$300?

I am planning on doing a lot less trading over the next few months though. I have a lot of other work on my plate and could use the 1-2 hours a day I spend keeping up on investments and reading about investing. Posting on this blog, etc. I’ll probably park my money in an index fund and try to forget about it. Even so, thanks a bunch for the advice.