Hello! Can some one give me some advice about day trading?
- Thread starter Mononoke
- Start date
Quote from Mononoke:
Ok, but can you explain to me why 1% commission makes it impossible to trade. Even if, I were to put that 1% as risk.
Because the best day traders typically average less than 1%:
http://www.cxoadvisory.com/individual-investing/do-day-traders-make-money/
I am a US Equities day trader and I have approx 13 positions per day. My EV is around .19. This means that (on average), I make 19% of my RISK SIZE per trade. My risk size is around $550 per trade, so this means that I make an average of only $104.50 per trade. Now, my average TRADE SIZE is around $50,000 per trade. So, if you are paying 1% commissions on a $50,000 order, then your COST (per transaction) is $500 bucks. This means that to do a round trip on a $50,000 order, you'll be paying $1,000. Now, with all of that said, I use the Interactive Brokers commission structure and my average position size is around 1500 shares. With Unbundled commissions, my average commissions size is around $5 per trade (not $500). There is just no way in HELL that you can ever be profitable day trading with costs this high. No way!
Jason
Jason
Quote from Mononoke:
Ok, but can you explain to me why 1% commission makes it impossible to trade. Even if, I were to put that 1% as risk.
Thanks
That was very sobering
Anyways i want to get into trading but my capital is very small, $4000. Can you give me some advise about what sort of trading i should get into. The market here is very volatile, out of the 250 of companies registered there at least 5-6 that make 15+% gains within a day, but alot of these stocks that fizzle out the next day. What initially attracted me to day trading was that if you hold stocks overnight the transaction cost is 3.2% and intraday it's 1% for both buying and selling, so like .5% per transaction.
You seem to believe that .5% each way or 1% as a round turn is a reasonable commission rate -- it is not.
If you could cut your transaction cost in half and then cut it in half again and then cut it in half a third and EVEN A FOURTH time it would still be way to high to show a profit. Some markets can not be day traded. Accept that and either trade in a much longer time frame or trade another market. No matter how many times or how many ways you review this the answer will be the same: Day trading success is impossible without very low transaction costs.
If you could cut your transaction cost in half and then cut it in half again and then cut it in half a third and EVEN A FOURTH time it would still be way to high to show a profit. Some markets can not be day traded. Accept that and either trade in a much longer time frame or trade another market. No matter how many times or how many ways you review this the answer will be the same: Day trading success is impossible without very low transaction costs.
Hey Mononoke,
I wish I could give you advice, but (to be honest), I don't have any. The only thing that makes sense, based on what you've described is to do much longer term trading. But, I can't help you there either.
Sorry.....
Jason
I wish I could give you advice, but (to be honest), I don't have any. The only thing that makes sense, based on what you've described is to do much longer term trading. But, I can't help you there either.
Sorry.....
Jason
Quote from Mononoke:
Thanks
That was very sobering
Anyways i want to get into trading but my capital is very small, $4000. Can you give me some advise about what sort of trading i should get into. The market here is very volatile, out of the 250 of companies registered there at least 5-6 that make 15+% gains within a day, but alot of these stocks that fizzle out the next day. What initially attracted me to day trading was that if you hold stocks overnight the transaction cost is 3.2% and intraday it's 1% for both buying and selling, so like .5% per transaction.
No worries mate. I don't like doing long term trading, I don't have a lot of capital. Part of the problem here is that the government charges a .8% tax, they do this because there is no taxation of capital gains in this country. I'm sure they can scale that 1% down to .1 or something like that. the brokerage system is a little unfair as well, if you trading close 100K at a time the fees drop to .01%.
I'm going to give this a try. I'm going to try to be a little conservative while trying to do some trend following with tight stops, and test this for a couple of weeks and see how it goes.
I'm sure there has to be at least .5% chance of me making some money out of this.
I wouldn't be surprised to learn that the transaction costs result in markets where the prices and movement take that into account. After all, if everyone is paying at least 1%, and people still need to buy and sell, there would always be a role for a trader. To some extent, I think this also applies when people say a transaction tax in the US would kill trading. I think it would just change spreads and liquidity, but there would still be an opportunity for trade.
I also part of the reasons they can maintain that level of transaction costs, is because there is money to be made at that level. otherwise, transaction costs would drop dramatically. Brokers simply want more trade, for them there is virtually no cost involved with adding an extra customer. Why would they maintain this price if their is no customer base for them?