Hi, I've seen few people here are profitable from the market but lose money due to commissions, I built a simple equation for those people here it is:
B > 2CP
B - Buying in cash (in dollars)
C - minimal Commissions (in cents, if in dollars: just C/100)
P - Price of a share (in dollars)
I'll explain and give an example, Buying in cash means how much money you use to buy shares, it should always be bigger than twice the minimal commissions the broker is charging you per a single trade, multiplied by the single share price
Why? if you satisfy this equation when you buy/short you will get the lowest possible commissions (minimal point on a 'smiling' parabola)
example: let's say we're using SureTrader, where they charge 0.01 cent per trade, minimal commissions are 4.95$
let's say $XYZ stock share price is exactly 1$ if I buy just 300 shares I am going to pay more than just 1 penny per share which actually means higher commissions. For a single trader! twice than that for the second following trade.
Let's say I want to buy 3000$ worth of shares, with the price of 6$, because right now is a good morning panic and I believe there will be a bounce.
2 times (C)ommissions with SureTrade would equal 990
Meaning if we plug in the numbers:
3000 > 990*6
which equals
3000 > 5940
now 3000 is NOT bigger than 5940 meaning you will be paying more than just 1 cent per share you trade IN A SINGLE TRADE
Now let's say the stock did bounce but not by much, I am in profits but I'm afraid and I want to get out, so I sell, even if you are in profits because we did not satisfy the previous equation we could be in loses.
Obviously if price would raise to 7$ you would still be profitable after commissions, but in the case it does not, you'd lose money.
Let's consider the same situation but where the share price is just 1$, we get
3000 > 990*1
which is bigger, meaning we would only pay 0.01$ per share, all we need to gain is just 3 cents and you'd be profitable, and not lose money on commissions.
But don't let this equation limit you to much, if you think it's a really good play go for it.
If you guys want to see how I arrived at this it's just simple algebra, to lazy to write it tho.
I don't know about this but on etrade. It's simple a thousand dollars is 2% 500 dollars Is 4% and etc. whatever percentage 6.95 equals in your entry
Fidelity is jsut 4.95 per trade and a few cents added on when you sell...
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