| The trading commissions you pay for the privilege of | | | | potentially, they will work for a yearly fee. But you |
| buying and selling stocks will be related to the type | | | | need to discuss this with them before you trade. |
| of stock broker you use. Generally, in order to buy | | | | For most stock traders today, online stock trading is |
| and sell a stock you will require a brokerage firm and | | | | impersonal and demands that we place the order |
| they all charge something for the privilege of buying | | | | ourselves at the cheapest costs. Stocks can be |
| or selling a stock for you. Choose your stock broker | | | | purchased through online discount stock brokers for |
| wisely because if you do not, you may find that they | | | | as low as $1 per 100 shares up to approximately $30 |
| are the only ones making money. When you initially | | | | per 1000 shares. For instance, let's say you want to |
| make your choice, determine what type of trading | | | | trade 500 shares of a $20 stock. The commission to |
| you are going to be doing, day trading, swing trading, | | | | buy and sell this stock would likely be between $10 |
| position trading or are you an investor. Also, what | | | | and $60 depending on the online discount stock |
| types of stocks will you be trading blue chip or penny | | | | brokerage service you used. This equates to a |
| stocks or somewhere in between. | | | | commission rate of 0.1 to 0.6% for this trade. Quite a |
| If you are looking for and enjoy the interaction of a | | | | difference between the approximate 4% charged by |
| full service broker remember that they charge up to | | | | the full service broker. You see, improving your |
| approximately 2% commission for each transaction. | | | | knowledge in the trading arena does have its |
| This equates up to 4% for a complete buy and sell | | | | rewards. |
| transaction. For many individuals, who lack the time | | | | If we now look at trading $10,000 more frequently |
| and knowledge to trade stocks by themselves this | | | | and decide we want to trade weekly, completing 52 |
| may be the best way to go especially if you can find | | | | trades per year will cost between $520 and $3,120. If |
| a good stockbroker. But what does 2% per | | | | your account balance is $100,000 you are now |
| transaction really mean. Well, to give you an example, | | | | looking at a 0.52 to 3.12% gain just to break even. |
| if you complete one trade averaging $10,000 once | | | | This puts far more cash into your pocket instead of |
| per month at the end of a year you will have paid | | | | the broker provided you know what you are doing. |
| $4,800 in commission. With a $100,000 account this is | | | | If you are thinking about switching brokers or about |
| equivalent to 4.8% just to break even. Using this as | | | | starting to trade stocks, you may want to do some |
| an example, you should be able to determine that | | | | basic math before you start to identify what type of |
| with a $50,000 account you will need to earn a 9.6% | | | | returns you need just to break even. This should be |
| rate of return, just to break even. In many cases, full | | | | one of the criteria you use to choose your stock |
| service brokers may charge a lower commission or | | | | broker. |