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I say beware of high commissions!!!!
High is relative though!
Ken Roberts Students-------$100/RT
Full Service Broker-----------$30-70/RT
Lind-Waldock------------------$27/RT
Discount-------------------------$20/RT
Deep Discount----------------$15-17/RT
Institutional----------------------$5-8/RT
TimberHill(emini)--------------$4/RT mininum $10 charge per ticket
Emini local(Globex2 term)-$3/RT+400/month terminal charge+data feed charge
Local in SNP pit--------------$1-2
If you are speaking from a equity trade perspective then I think if you can
DIRECTLY send your order to and ECN (eg. Island) then it MAY BE worth the
higher commission generally $25 per SIDE or $50.00/RT! if you are not doing
so then I think you should pay as little as possible since someones is
probably making money off you by selling your order flow and why should you
pay a ridiculous 29.95 (Schwab/DJL) for the PRIVALEDGE.
If you are talking futures trades (daytrades) and a self directed
account,often I have heard the same tune your singing but no evidence that
the commission has any correllation on the quality of a fill. Everyone
advertises "FLASH FILLS" and Flash often results in slippage that is
unavoidable no matter what route you take. Many discount IBs use the same
filling broker as the bigger discounters. EG. you pay 16/RT and call the
floor (really the Lind Waldock booth on the floor and a clerk signals your
order into the pit) or you open an account with lind waldock and pay $27/RT
where is the added value in paying the higher rate??????? Your calling the
same phone number!!!
Certainly methods such as LeoWeb have advantages but also are just as
unreliable at times as getting a busy signal from your broker. I would
think that a leased line would probably have the least slippage and if one
is at that level I don't think they would tolerate such RETAIL commission
rates. The professionals don't pay these rates(do they know something you
don't???), why should you???, what edge is there in paying more going to
give you???
commission is the only trade variable you have direct control over. It is a
fixed cost of doing business and who wouldn't try to lower fixed costs.
PS this will not make a marginal method profitable but is a principle of
doing business. Calls to mind a barrage of messages regarding lowering
realtime data costs. Some traders were so wealthy that $2,000 to
$3,000/annual decrease in fixed costs(profit) wasn't work bothering with yet
the industry seems to think the competition over rates IS important. I feel
in this business one must critically evaluate all aspects of this business
and commissions is in general the largest fixed expense.
Globex2
The Future is Today!
-----Original Message-----
From: Franklin A. Cerrone <cerrone@xxxxxxxxxxx>
To: HeyPeter <heypeter@xxxxxxxxxxxxxx>; Scott Hoffman
<trader20@xxxxxxxxxxxxxx>
Cc: omega-list@xxxxxxxxxx <omega-list@xxxxxxxxxx>
Date: Friday, November 27, 1998 9:02 AM
Subject: RE: Daytrading article in WSJ
>Beware of very low commissions....the FILL is the most
>important part..............think of the difference in 2 or 3
>ticks....
>do the math...you'll see what I mean.
>
>Frank
>
>Frank Cerrone
>cerrone@xxxxxxxxxxx
>
>> -----Original Message-----
>> From: HeyPeter [mailto:heypeter@xxxxxxxxxxxxxx]
>> Sent: Wednesday, November 25, 1998 1:37 AM
>> To: Scott Hoffman
>> Cc: omega-list@xxxxxxxxxx
>> Subject: Re: Daytrading article in WSJ
>>
>>
>> Hey Scott
>>
>> Gotta agree with you on how critical transaction costs
>> are to successful
>> DAYTRADING. I have been daytrading for about 2 months,
>> and am finding
>> that even though my gross p/l is positive, when
>> commission is taken into
>> account the business becomes marginal.
>>
>> A while ago, it was mentioned here that the
>> 90%losers/10%winners rule
>> came about from some study at a brokerage house. In it
>> they mentioned
>> that although gross of transaction costs the accounts
>> made money, after
>> adding in commission, the profits were swamped and most (90%) LOST
>> MONEY.
>>
>> In daytrading, this is gonna apply even more - that's why
>> I am trying to
>> get on the floor of an exchange where I pay a clearing
>> fee of about $2,
>> and no commish c.f. a retail rate of $20-$30 a round turn.
>>
>> I believe in the long run $20 commish is unsustainable
>> for most people
>> trying to daytrade and pick the bones out of smaller price swings
>> intraday, assuming you are reasonably active. (And I haven't even
>> mentioned slippage yet . . .)
>>
>> From where I am standing, the only group getting rich
>> from daytrading
>> are the brokers.
>>
>> If you want to daytrade for a living and to give yourself the best
>> chance of success then you must,
>>
>> GET YOUR TRANSACTION COSTS AS LOW AS YOU POSSIBLY CAN . . .
>>
>> (Alternatively, ask yourself at what commission rate would your
>> daytrading business stop becoming marginal. If you
>> cannot get such a
>> low commission rate from your broker then don't daytrade!)
>>
>>
>>
>> Penny-wise (hopefully pound-wise too ;-) Pete
>>
>>
>> Scott Hoffman wrote:
>> >
>> > When I daytraded the NYFE back in 1997, I found that
>> although my strategy
>> > had a 25% edge (think 62.5% win, 1:1 payoff) *before
>> slip/comm* after
>> > slip/comm it was a breakeven deal at best. And that's
>> not counting datafeed
>> > / hardware costs. Articles like this never really give
>> the true impression
>> > of just how difficult it is to consistantly make money
>> daytrading. The
>> > transaction cost barrier is the killer. Maybe the
>> barrier in the equities
>> > world has dropped so dramatically that it may actually
>> be feasible. On the
>> > other hand, I posted an article from the WSJ a few
>> months ago about Block
>> > Trading's (a daytrading outfit where you go to there
>> office, use there
>> > equipment, pay them a fee) demise indicating *not one*
>> of their clients made
>> > money. Be sure to be skeptical of casual statements of
>> profitability.
>> > Anybody can say anything. And our human nature is that
>> the more we *want*
>> > something to be true, the less objective - or should I
>> say "the more
>> > foolish" - we become in judging truth from fraud.
>> >
>> > Scott Hoffman
>> > Issaquah, WA
>> >
>>
>
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