Cost of Trading

Cost of Trading
By
www.CandlestickForums.com

The cost of trading includes more than
commissions, fees, and premiums.

The cost of trading takes in all monies
paid and foregone in the pursuit of
opportunity in trading stocks,
commodities, futures, and options
contracts.

Online brokers can attract clients with
the promise of low commissions.

Although commissions count in the cost
of trading they can pale in comparison
to the cost of trading in low volume with

large spreads between bid and ask
prices if traders do not place limit
orders.

The cost of small cap stock investing
especially can mount up if volume is low
and liquidity nil.

Part of trading analysis needs to extend
beyond the spot price and the strike
price,

beyond Candlestick chart analysis and
fundamental analysis to look at the cost
of trading in various markets and
conditions.

Commissions and fees are something
that you will see on the printout of your
trades.

Commissions have certainly come down
from what they were years ago although
fees are still with us.

This is part of the cost of doing business.

For the active trader it makes all the
sense in the world to trade blocks of
equities at a flat rate instead of a
percentage.

It may seem that sufficiently successful
stock picking, options trading, or
commodity investing is all that is
necessary but all costs should be taken
into account.

The premium paid in buying calls and
buying puts will vary with the price of
the underlying equity.

It is a larger cost of trading for the
unwary trading in hope of a market rally
or collapse. Profit is gain minus cost,
every cost.

Only using limit orders instead of buying
and selling stock or other equities at
market price should be a daily practice.

The spread between bid and ask price is
the difference between what sellers are
offering at and buyers are offering.

In a slow market this difference in price
can be rather large.

Also the number of stock shares being
offered or bid for may be relatively
small.

This presents two problems that affect
the cost of trading.

A trader who buys and must promptly
sell equities will pay the difference
between bid and ask price for this
experience.

This cost can be substantially more than
commissions and fees, especially on low
cap and penny stocks that are already
thinly traded.

The other issue is one of availability. If
the trader places a large order to buy or
sell there may not be enough of the
equity available.

The depth of the market is not very
deep.

Thus your stock order, or futures orders
or options orders, will not be completely
filled.

If you have not placed a limit order the
reminder of your sale or purchase may
be completed at disadvantageous prices.

If you are thinking of making a trade at
market price the market can change in
these circumstances to your distinct
disadvantage.

The cost of trading should go into long
and short term assessment of what
markets you trade,

if you wait for high volume and high
liquidity to trade, and if you sit out some
market conditions altogether.

Online Stock Market Reviews presented
live via the internet by Stephen Bigalow

Cost of Trading

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