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Daytrading Broker Comissions Compasisons: Per Trade vs. per Share

I’ve recently adopted the idea of trading around the core and scaling in and out it’s an interesting idea of taking partial profit on winners, averaging up on dips or pops (depends on whether I’m long or short on a position). This idea helps maximize profit while keeping risk to a minimum. At first, I didn’t think that averaging up on a position would be worth while, but after experimenting with it, it’s pretty cool and more importantly, a great risk management technique. Also, summer is approaching, the market is becoming more illiquid, therefore scalping the market is mostly the way to be consistent.One problem with that is commissions burning if you have a per trade plan with your broker. I previously have a per ticket plan of $4.95/ticket up to 10,000 shares. In this market, I like to scale in and out of the trade, buying selling a few hundred shares and get a feel for it, taking quick small profit, trade around the core and average up if it goes as plan. Sometimes it can be 100 tickets a day, which is $495 in commissions alone! Seeing that the strategy works, but burning commissions definitely diminishes the effectiveness of scalping, I contacted my broker to change to per share plan which is $0.0025 per share.

Sure, it seems better to have a per ticket position since it can allow up to 10,000 shares, because per share position would be more expensive at over 2,000 shares. However, in reality, nobody will hammer 10,000 shares position right away on a stock just to save a few bucks. For position that size, the risk associated with it exceeded a few bucks in commissions and the reward seek is much more. For position that size to work, it needs to be scaled in by trading around core and averaging up on winners. If I hammer down 10,000 shares, I have to already had partial profits or a conviction with good risk/reward plan (self reminder). If I scale in and out of trade, taking partials here and there, then when I scale up to 10,000 shares (which I rarely do), the tens of dollars in commission wouldn’t matter anymore as the plan already exceeded my risk and the anticipated reward exceeded the fees. The same can be applied to exiting winning trades partially multiple times to let the winner run.

As a result, I did a personal case study using my trade history as guide to optimize my trading mentality by reducing expenses to a minimum, also to calculate how far the stock needs to move for me to reach point of profitability, hence increasing my winning percentage. The list below will give you an idea of my maximum fee on trades of multiple sizes using $0.0025 per share plan with my current broker, CenterPoint Securities. The fees include brokerage commissions, ECN, SEC, TAF, and NSCC fees:

  • 100 Shares Position: $0.5 commissions roundtrip, $0.8 ECN fee max, $0.3627 SEC fee max, $0.02 TAF fee max, $0.008 NSCC fee max. The maximum total is $1.6907  in fees and commissions, which is easily achievable; versus $6.1407 if I choose a per trade plan, which is also achieveable but wouldn’t be worth while scalping.
  • 200: $4.7852
  • 300: $7.3102
  • 400: $5.3208
  • 500: $10.6574
  • 1000: $17.7294

According to my personal fees & commissions schedule, the stock only needs to move less than 5 cents for me to profit and cut losses without any big loss. However, the idea is not about making thousand trades and scalp every trade, it’s about protecting gains if the move goes against or doesn’t more as far as expected. The regular risk/reward I look for when entering position is usually 3 to 1 (with price movement of $0.1 risk to $0.3 and 0.5+ reward). Scaling in and out, scalping here and there before the big more can really be beneficial. When I’m ready to average in, I can do so without double checking a few cents gap in average. It definitely feels more comfortable than actively scaling while on per trade commissions structure.

To conclude, per share plan is always better for building account without  worrying about the commissions buildup, and can positively boost trader mentality. It helps me scalp for quick profit while waiting for the bigger picture idea to work. It’s more like micro scalping, but if you have been trading for a while, you know that commissions add up quickly, so do small gains!

Tips: If your broker gives you rebates for adding liquidity (buy at the bid and sell at the offer), which they should, you can reduce the commissions and fees even more.

P/S: I use my current broker, Centerpoint Securities, for regular day trading and using this scalp strategy. For trading larger blocks, I will look forward to opening another account with Regal Securities because they only charge $5 per trade for unlimited shares. For holding some swing positions, I will reactivate my abandoned Interactive Broker account.

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Categorized as Finance

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