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Strategies & Market Trends : Portfolio Explorer: Hidden Trading Costs -- Ignore unavailable to you. Want to Upgrade?

To: portfolioexplorer who wrote (1)	12/6/1999 11:03:00 PM
From: portfolioexplorer	Respond to of 3

Continuing on with the subject of hidden trading costs, how do you track them? By definition, they're hidden. Your broker may sneak in a markup, the market makers may conspire to keep an artificially wide spread, or someone could even be front-running your trades. How can you possibly detect this? In order to find these hidden costs, you need to view things a little differently and break up your view of investing in stocks. There are really two separate skills here: 1) Stock Picking - finding stocks that will go up more than the market (or down, if you're a short). 2) Stock Trading - buying (or selling) for the best price possible. Stock picking is pretty obvious - that's when you brag to your buddies that you bought Microsoft when it IPO'd. But trading is a little less obvious. To check out your trading ability, you need to compare the price that you bought or sold at against a fair, or "target" price. The best target price is the price that the stock last traded at when you placed your trade. Unfortunately, most people don't keep track of this price, so you're left using the closing price for that day. It's a little less accurate, but pretty fair. So let's say that figure out that pay an average of $.05 per share over the target price for your last 50 trades of 1000 shares. That can add up to real money. Mike