Welcome to tip #2 in my beginners stock trading series! I am really excited to share this simple yet massive money saving tip with you.
Are YOU paying too much for trades? Learn an amazing stock trading strategy HERE that helped me double my trading account last year.
Stock broker commission
Most new stock traders don’t realize that it is relatively easy to reduce the fees that they pay per trade just by asking their broker! For new frequent traders with small accounts, the savings that this simple step can make the difference between being profitable or losing it all and giving up! This is especially true for day traders, where commissions can really add up.
Flat-fee versus pay per share
Most brokers will start the new account on a flat fee basis. This means that the new trader will pay, say $6.99 to buy or sell any amount of one stock. This initially seems like a decent deal; however given that most new traders do not buy huge volumes of one stock it can be much cheaper to simply pay per share instead.
Here is a simple summary of how I reduced my broker costs by over $9000 in 2013! This helped me to turn a profit in 2013 from stock trading. I trade with SpeedTrader and I have continually found them to be a great, cheap trading platform with amazing customer support. Click here to learn more about SpeedTrader.
- In 2013 I made 750 trades. The previous year my broker charged me $6.99 each way.
- I switched from flat-fee to pay per share: Now it only costs me $0.99 each way!
- This is a saving of $12 per round trip per trade!
- Total savings = 12$*750 = $9000 saving last year!!
A hidden benefit: I found that I actually became a better, more disciplined trader because of these reduced fees. This mechanism was primarily due to the fact that I was much more likely to sell part of my position when I had profits and thus I protected these profits more effectively. Psychologically, it was just much easier for me to sell enough stock (say 100 shares) for a $50 profit when it only costs me $0.99 instead of $6.99.
Negotiations
Simply switching from flat-fee to pay per share will dramatically decrease spending for most beginner traders. However, it is also very possible to negotiate the fees that you pay your broker. Most brokers are very competitive and will go to great lengths to keep you as a loyal customer. Here is a simple, yet valuable tip that I have used to reduce commissions as well as margin interest.
- Summer time: This is the very best time to negotiate with your broker to cut you a commission’s break. This is because summer time is historically a very slow time for the stock market and thus brokers are usually a lot more willing to negotiate and keep your business.
Finally, remember that you can sometimes also negotiate your margin interest rate. All the above ideas work best if you are considered a good customer! If you do not ask you are definitely missing out!!
Good luck trading!
Russell
