Subscribe Feed (RSS)Commission and slippage vs. R
January 13th, 2007 by eyal | Filed under Day Trading. |
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I’ve noticed recently that commission and slippage are getting bigger and bigger portions of my R at risk. For example on a $300 R at risk I’d have to allocate at least $30 for commissions and slippage, that’s 10%, which strikes me like a lot. And even that won’t always be sufficient, especially on lower priced stocks where quantities can be large and each cent slippage quite meaningful. I actually reduce quantities slightly on the fly for those low priced stocks to allow for that.
Over the last 2 months I would have paid less in commission if I were on a fixed plan, such as $9.95 a trade rather than a per share plan, like the $0.005 I get at IB. So IB, with its so-called rock bottom commissions is no longer the cheapest option for me. Food for thought. On the other hand I really like using TWS, I’m very used to it which means I’m fast operating it, it’s rock solid, good interest rates, good order types and execution, foreign currencies and everything else I can think of outside of charting and.. per trade commission plan. Can someone at IB please do something about this? :-)
That’s why I’m not on Cyber or IB (though I’d love access to futures and currencies)… scottrade $7 is cheaper overall for the amount of shares I tend to trade.
Yeah I was looking at Scottrade Elite today as an option, but I wouldn’t want to give up on IB and I’m recluctant to split my account.
I also couldn’t see any information on Scottrade’s order types, margin interest rates, balance interest rates and withdrawals (international or domestic) transfer fees.
It’s very no-frills… plus it’s 2x rather than 4x intraday margin, which is a pain sometimes.
That’s why I favor higher priced stocks over lower priced ones. I can usually find plenty of volatility in stocks over $10 or even $20 per share. But that’s not to say that I don’t trade the single digit stocks. But if I do, I won’t trade them if my position size makes the commission ridiculously high.
It comes down to what I always say…you have to do the math with regard to commissions and get on a plan that makes the most sense. Determining slippage is of course another issue when comparing brokers. What seems like a low commission may not be when you factor in slippage. Lack of slippage is another reason why I tend to favor high volume, higher-priced stocks…
Richard: that’s a pity, 2:1 is a deal breaker for me. I’m already struggling with 4:1.
Michael: yes I know what you mean, the only issue with high priced stock is again the buying power issue when I have several open positions but that’s not a different problem so generally speaking I prefer those too. On the commission side, every time I looked for an alternative to IB I kept going back to staying with them cos of the overall ‘package’.