Friday, April 26, 2013

Trading Commissions...The only cost to trade!

The barrier to entry to trade these days is so low with firms providing data and trading platforms for free to all customers. There is no reason why any retail trader should be paying to use a platform or receive market data feeds. For online brokers, this is now a cost of doing business.

The only cost you have as a retail trader is commissions. And even these have been commoditised over the last decade. Now that is not to say that brokers are not going to try to squeeze a higher commission rate to the uninformed trader. I have talked to a lot of new traders lately on the topic of commissions and the fact that they are negotiable.

As many of you know reading this blog, TD Ameritrade is our preferred and recommended broker for all traders. I have been with Interactive Brokers and TradeMonster and it does not even come close to what the ThinkOrSwim platform offers. With that said I want to share a few insights on negotiating your commissions.

After helping a few traders get their commission rates lower of the the last few years I have found the sweet spot to where TD Ameritrade is willing to start a new trader until they build up some account activity.

1) $1.50/contract for option trades (no minimums)
2) $5min or  $0.01/share for stock trades ($5 for 100 shares, $6 for 200, etc)

If you are opening up a new account with TD Ameritrade you get your first 60 days of trading for free, so I would wait to negotiate the commission rate until after your free trades are up.

Over time as you become more active you can go back to the negotiating table to get your commission rate lowered on the option trades and have them remove the $5 minimum for the stock trades. I personally have a $1 min or $0.01/share.

Good Luck Trading!

In The Money Trades

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