2012: The Battle for Survival

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Quote from RichardRimes:

Neke I know you take comission costs into consideration in showing net gain but have you totaled the cost of comission and compared what you are paying with what it would cost at IB?
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Took the opportunity to analyse my commissions. Since the start of the year, paid $14971 in commission. That was 5422 option contracts total(entry+exit) for 9091 commission and 782600 shares (entry+exit) for 5879.

Given that a typical stock trade might be 700 shares @ 40. For Ameritrade, the cost is $7, while at IB (at $0.005/share) it is $3.50. For option a typical trade would be 10 contracts. The cost at Ameritrade is $13.5 (7+0.65*10), while for IB it would be $7 ($0.70/c). So yes, all in all, I would probably be saving close to 50% at IB at this time. When I had much higher balance on my account and trading bigger sizes, the difference wasn't there. I have built my platform so much on how Ameritrade works, I am not ready to do a rework for IB at this time. But thanks for pointing out the commission. It would certainly have made for better returns. Who knows how much went to slippage. Those are big barriers to profitability in short-term trading, and why I am keen to avoid intra-day noise trading, but only focus on plan developed before the market opens.
 
Its good that you are cutting witdrawals to 2.5K a month, 30K a year.

30K withdrawals+30K a year commissions = 60K drain on the account.

Thats extremely hard on a 90K account, almost impossible to make money.
 
Neke,
Glad to hear from you and nice to see you do well this year.
I have been at this (trading US stocks) since 1986 and seen countless part-time traders getting crushed and not recover.
I'm rooting for you to succeed.
 
Quote from southall:

Its good that you are cutting witdrawals to 2.5K a month, 30K a year.

30K withdrawals+30K a year commissions = 60K drain on the account.

Thats extremely hard on a 90K account, almost impossible to make money.
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The more I think about it, the more painful it becomes: I need 35% annual return to break-even on the commission. That is unsustainable. I keep wondering why there is no brokerage that charges a fixed cost per year (dollar or %) + passed costs( like exchange and sec fees), destined for active traders. Why not have say a fixed $1000 per year or (maybe say 2% of account), and thereafter you can make as many trades as you want (you only pay for passed-on costs. What extra overhead are they incurring to be charging per trade and per share? Mailing 20000 pages of trade confirmations: certainly not in this electronic age. Handling enquiries on trades? I think not; they could pass on that cost if they want. So why has no brokerage thought of setting up such a structure? I am pretty sure they would get tens of thousands of active traders in a flash.
 
Quote from neke:

Took the opportunity to analyse my commissions. Since the start of the year, paid $14971 in commission. That was 5422 option contracts total(entry+exit) for 9091 commission and 782600 shares (entry+exit) for 5879.

Given that a typical stock trade might be 700 shares @ 40. For Ameritrade, the cost is $7, while at IB (at $0.005/share) it is $3.50. For option a typical trade would be 10 contracts. The cost at Ameritrade is $13.5 (7+0.65*10), while for IB it would be $7 ($0.70/c).
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If the "vig" is 5% (commission + bid/ask) of every single trade and done with great frequency, a quick succession of 10 trades and you've quickly lost 50% of your capital.
Maybe you should think about stopping your trading for 1 to 6 months. Totally retreat and re-evaluate. JMHO.

I think trading options at IB is too expensive at $0.70/c. Definitely stop trading options there. At least minimize the vig with lower commissions.

Optionhouse: $0.15/c.
Eoption : $0.10/c.
 
Quote from neke:

TI keep wondering why there is no brokerage that charges a fixed cost per year (dollar or %) + passed costs( like exchange and sec fees), destined for active traders. Why not have say a fixed $1000 per year or (maybe say 2% of account), and thereafter you can make as many trades as you want (you only pay for passed-on costs.
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Because almost all active traders would take it and the broker would make tremendously less profits.
 
Quote from Trader.Fighter:

Because almost all active traders would take it and the broker would make tremendously less profits.
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But if it is competitive/profitable for the broker (I dont mean a FAT one like Ameritrade that is catering to 10 million dormant accounts with hardly any commission), why is there no broker stepping up into that space. Surely the cost of running the brokerage business cannot be that high. Just take 20000 active traders @ $2000 per/year, thats is already $40million. We are not talking of people that need a lot of hand-holding support, but active traders.
 
Quote from neke:

But if it is competitive/profitable for the broker (I dont mean a FAT one like Ameritrade that is catering to 10 million dormant accounts with hardly any commission), why is there no broker stepping up into that space. Surely the cost of running the brokerage business cannot be that high. Just take 20000 active traders @ $2000 per/year, thats is already $40million. We are not talking of people that need a lot of hand-holding support, but active traders.
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I am curious as to what are the capital requirements to setup a futures only, equities only and a universal brokerage? Maybe someone will setup a brokerage and offer such deals to retail.

Regarding you personally, I think more pertinent question is now that you have realized 35% of your PL goes to brokerage, what are you going to do about it?

My suggestion: Hire a computer science engineering student as an intern for 6 months pay him 2k-3k per month. It will cost you 12-18k. And ask him to rewrite everything for IB that you have written for Ameritrade. In the long run, you will save a lot. Maybe you ask him to rewrite only the infrastructure, and write all the core strategy part yourself.
 
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