Dear traders,
As you have noticed, on line trading has become a very profitable business for a number of brokers who have been able to take advantage of on-line trading trend. However, as the number of their clients have increased, we as traders, have seen no reduction in their commission fees. Most brokers charge about $20 a ticket. That is $40 round trip.
Although it is true that these prices are lower than some of the bigger brokerage houses, they are substantially higher than other internet brokers. The old justification given to traders that by getting an improved price of 1/8 or 1/16, the higher commission fees are justified is no longer acceptable. The time has come for us as traders to demand reduction in our commission fees.
Some of the daytrading brokers such as MBTrading offer an incentive to new customers: $5 a trade for the first 3 months. I am not advertising MBTrading's business, I simply used them as an example. If they can offer discounted rates, all other brokers should too.
Traditionally professional traders have paid less than 2 cents per share for their trades. If you are trading less volatile stocks and trade 1000 shares each time, $20 a ticket will work out to about 2 cents a share. However, for those of us who trade more volatile stocks or simply do not have the financial means to trade 1000 shares of RNWk at each given time, which I don't recommend even if you could afford it, the commission fees are about 5 cents a share for each ticket of 200 shares.
I believe that we should all demand better commission rates, regardless of which broker we work with. Commission rates are almost always subject to negotiation, based on the number of trades that you do.
If you do about 10 trades a day, 50 a week, 200 a month, it adds up to 400 tickets a month. That generates about $8,000.00 in commission to the broker (you risk your money and the broker makes the risk-free money). In fact, I think that figure is substantially higher than what an AVERAGE day trader makes. Now, you can save as much as $6,000 a month if you renegotiate your commission rate from 20 to 5.
Lower commission rates allow you to be more aggressive trader and also exit from your position immediately at the minimum loss when the market does not move in your favor immediately after you have taken a position, in that your lower commission can be tolerated in those situations.
I truly believe that we should push for COMMISSION FEES based on the number of shares traded, subject to a volume discount for very active traders. That way, even those of us who trade in 200, 500,.... blocks can benefit from lower commission rates.
The online brokers are getting rich without passing over the portion of their profit to their customers through lower commissions. Further, they spend ZERO dollars to educate the public that it is not daytraders who are responsible for the volatility of the market, but the Market makers who have 15 seconds to look at the orders being piled up in their level III windows, and then simply raise their Ask price, or continuously lift their bids in the falling market. If on line brokers want our business, they should spend a portion of their revenue to raise the public awareness and understanding of what little effect day traders have on the market as a whole.
Considering the advanced technology available today and the low cost of doing business on line, when your broker's office can be a small room in the back of a grocery store some where in Texas, where most on line brokers are, WE AS TRADERS SHOULD NOT PAY MORE THAN 2 CENTS PER SHARE FOR OUR TRADES.
However, if we don't demand lower commissions, they surely are not going to lower their rates. Lets demand lower commission fees based on the number of shares traded: 2 cents a share.
Good luck to you all trading next week |
