What's up guys. Just wanted to share a quick experience I've just had which made me take a step back and re-evaluate things a bit. I've been trading for a while now, but I never really paid any attention to commissions because after all, my broker only charges $4.95 per trade.
Truth is, I'm an idiot. Even though I read and heard about ECN fees, I never sat down and really looked into it.
If like me, you are trading with a very small account, commissions are a bitch. If you factor in extra fees, your $5 commission rate can easily get a lot bigger. In fact, those fees can turn a profitable trade into a loss pretty quick.
I will go over the concept real quick, but I encourage you to look on your brokers site for more information. These few tricks can save you a bit of money and help you remain green (I wish I listened a while back).
First, Electronic Communication Networks (ECNs like ARCA, Nasdaq, BATS, EDGX etc..) have a credit/debit structure for removing/adding liquidity to their marketplace.
Quick simplified example: Let's say the bid(buyer) is at $4.05 and the ask(seller) is at $4.06 and you want to buy 200 shares. You set you limit order for 200 shares at $4.05 and wait to be filled instead of hitting the ask. If you get filled, you won't get charged the ECN fees and instead will be credited for them because you are adding liquidity. On the other hand if you remove liquidity by placing your limit order to get an immidiate fill at $4.06, you will be charged the ECN fees + your commission by your broker.
Second, if you place a non-marketable order (not a multiple of 100 shares, ex:470 shares) also called an odd lot, you will be charged an ECN fee.
Seems silly but I never paid attention to any of this. I always knew I was charged more than $4.95 flat rate by my broker but never once stopped and wondered why. I traded $AKER today and had to pay almost $20 in commissions which in turn spiked my sudden interest. I got out pretty much even but was in fact down a lot because of those fees.
I wanted to share and hopefully save you guys a few bucks! Happy trading and see you out there.