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December 29, 2005
Broker Commission

One of the gold rules in day trading is to go with a cheap broker, it is necessary.

Like a company who want to reduce its costs, you need also to reduce your broker cost.
But be aware, quality must remain the same.
It's not a good idea to go with a broker that doesn't offer a good trading platform, a quick execution of orders… even if this broker commission is free (of course there isn't such broker).

Here is a link where you can check review of people about well know brokers: EliteTrader.

I want to take my broker as an example.
My broker is InteractiveBrokers, the commission is 0.5 cent per share (1$ minimum cost).

For a 1$ stock and for an order of 10 000$, I must buy 10 000 shares for a cost of 50$.
It represents 0.5% commissions.
For a 10$ stock and for an order of 10 000$, I must buy 1 000 shares for a cost of 5$.
It represents 0.05% commissions.
For a 100$ stock and for an order of 10 000$, I must buy 100 shares for a cost of 0.5$.
It represents 0.005% commissions.

As you can see, the higher the stock price the lower the commissions.
In my case, it's better to trader high priced stocks.
It doesn't mean that if I see a nice pattern for a low priced stock, then I won't take it.

For brokers that charge a fixed dollars amount, no matter the stock price is.
The percentage of commission will be always the same.


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