Ken, perhaps I can comment on the speed...
The need for speed is somewhat dependent on your trading style. If you trade longer term, such as swing trading for several days, your need for speed is somewhat reduced. If you take scalp (seconds to say 10 minutes) or do shorter-term position trading (a few minutes to a few hours), you will need more speed.
Assuming a $20 stock, for swing trading, you might look to make $1-2 over a number of days. If you lose an 1/8th on the trade, it's money, but it is a smaller percentage of the overall expected profit. Assuming the same $20 stock, Scalpers and short term position traders may be looking for say 1/4th to 1 point. Now it is a much larger portion of the overall profit.
If the stock is moving quickly, a few seconds could make the difference between getting in at your price target and getting in an 1/8th, 1/4th or even 1/2 higher (long) or lower (short) than your target. So with a Direct Entry broker, the faster execution gives you a better chance of hitting your target. With CyberX, typically I get executions within 5-10 seconds and very rarely more than 30 seconds.
However, speed is divided into two categories - execution and cancellation. Cancellations really hurts you with a web-based broker. With Datek, I had cancellations that took 30 seconds to two minutes. I took a 10% loss getting out of a position because of their abysmal cancellations. With CyberX, cancellations (with confirmation) are typically 1-2 seconds. Virtually instantaneous.
So why does that matter?
With Datek, I learned that I had to compensate for the speed problem, so I entered orders that were away from the Bid or Ask to ensure that I got the order in on time. I could NOT afford to enter a limit order, cancel and then enter another limit order. Sometimes I got price improvement, sometimes not. In general, I had to intentionally forgo profit to work around Datek's limitations.
With CyberX, I enter an order KNOWING that I have fast cancellations. I get more aggressive. If I miss the Bid or Ask, I can always cancel and replace the order in under 10 seconds. This is especially important with the exit. When you make an bad decision on a trade and the price goes the other way, you have to exit quickly and somehow salvage as much money as possible. Fast executions and cancellations help you do this. This has saved my hide many times.
While speed is less important when trading longer term, consider this scenario. You've been holding your favorite stock for 3 days. It's gone up 3 1/2 points. Your happy and prepare to take your well-earned profits. Suddenly CNBC announces that the Fed has held a special meeting and voted to raise the Discount Rate and the Fed Funds Rate by 1/4 point. (It could be the Fed, general market panic, or some major disaster.) The market tanks. Your lovely profits are disappearing fast. You enter your limit order to sell at the bid, but your broker is slow and you miss the bid. You cancel and reenter. Miss again. (Don't laugh, I've done it several times.) Finally on the third try, you are out. Total profit 1/2 point!
One thing I don't get, though. Even if it were slow, CyberX orders are only $15/trade. Higher than some web-based brokers perhaps, but lower than Schwab, Fidelity and others. Oh well, to each his/her own.
Regards,
Dan. |
