Evils of Comission Cost

Discussion in 'Trading' started by Div Poacher, Mar 14, 2003.

  1. I had thought that a $12.95 per trade was a great deal, compared to the $40 to $200 (yes! $200) trades I remember from years ago.

    But, I'm starting to realize why cutting comission cost to the bone *really* matters.

    It's obvious enough for a heavy day trader to multiply all his trades and figure out "gross savings". But comission cost can greatly affect position traders as well.

    For example, it can be hard to pick up a thinly traded issue. It's not fun to get a few lots of something on a partial fill, and be charged the full minimum comission anyway. (Or to cancel/replace at a higher price after a partial, which would be considered a new trade and a new minimum.)

    To avoid these problems, you end up placing limit orders a little higher, to be more assured of a complete fill. It's a "hidden expense" which may in fact be more than the comission.

    It's a drag to see a good price on something and think "but I just bought some, I don't feel like paying another full comission to get a few more lots, 10 cents cheaper".

    Comission cost carries with it an expensive psychological hindrance. When you enter a postion, you're more likely to hold on to a loser, because of the cost of getting out.

    I don't have any complaints about my retail broker in terms of service. It's convenient to have a branch I can visit and get a check on the spot. I've got plenty of money in there, and so they give me freebies like S&P stock guides at no charge, etc.

    But I've never really needed any of their other services, like HELOC, mutual funds, IRA planning.

    What do I *really* need? Cheap, fast trades. Period.

    So, I'm going to be unwinding my positions, and preparing to sneak out.

    Hopefully in a few months I'll be a "real trader". :cool: