Commissions – The cost of doing business! What are commissions? Do brokers even charge commissions anymore? How many other fees are there? Which brokers charge commissions? Where are these commissions in which we are speaking of? Commissions, Commissions, Commissions!
Too many traders think this is a No-No word and they try to avoid these fees at every cost. That isn’t always the best decision. As traders flooded into the markets with the no-commissions advertised by the Robin Hood broker they paid heavily in other ways. After all, if brokers aren’t making money from commissions, they HAVE to make money other ways. This could lead to poor executions amongst other things. I am not a professional by any means nor do I know every way that brokers make their money but I will happily pay the commissions and fees for better services.
WHAT!? Who would WANT to pay commissions if brokers are now having free commissions?
E*Trade and most other brokers went to free commissions for listed stocks but E*Trade still charges $6.95 in and $6.95 out (unless you make a certain amount of trades per quarter. Want to know more about E*Trade fees then click THIS link to read about their fees/commissions.)
Now this isn’t a post to dive deep into the reason “Why” brokers are and are not charging fees. I want to talk about MY experience trading OTCs (what are OTCs? Click THIS link)
Why I Began Trading OTCs
I began trading OTC first green days and would hold them overnight for a morning spike while I was paper trading. The FGD OTC was my bread n butter and what challenged my journey to grow. There was a catch paper trading.. no commissions until later when I figured out how to add that feature from the StocksToTrade options.
As I went live and OTC over night holds weren’t gapping up and spiking the next morning and several failed attempts at OTCs where commissions were eating my inexperienced live account, I swapped to listed stocks. Although I didn’t pay in commissions, I paid with inexperience. My account went down and up and sideways. As the hot sectors were fading a bit and my favorite morning panic setup wasn’t appearing as much, I switched back to OTCs.
This is where I found Jack Kellogg who has now passed $1 million in trading profits as a Timothy Sykes Challenge Student after about 3 years. Thanks to my previous experience and watching his videos NON STOP I have found my groove trading OTCs. SO what’s the issue?
Sizing Up But Not Enough
How I Learned
While trading listed stocks I didn’t trade much past 50 shares. This didn’t grow my account much but allowed me to practice my patterns and percent % gains/losses. I didn’t trade with more than $100 size max! With Over The Counter stock I sized up to $340 minimum size so I thought I had enough dollar value in there to make up for commissions and still have a profit.
My Math (not very good)
If I had a $300 position and I made 10% this would be $30 profit. Subtract Commissions (E*Trade 4.95 in and 4.95) plus fees that could be as much as $5.95 cap. These other fees are for FINRA trading activity fee and Section 31 fee. So figure about $16.00 on the high side being removed from EVERY completed trade. Now this capped fee is only on sales of stocks but click the highlighted link above to learn more about that.
Basically a little over half of my $30 profit is removed in fees leaving me $14. Now That is okay, but if you have a $30 loss then add the $16.00 to that $30.00 loss. Now your $30 loss is $46. So your profits are smaller and your losses are larger. Not a problem.. just make sure your math is accurate. When I made my YouTube video recap for November (will make another one to include today and these lessons) I was technically green by $7.81… BEFORE commissions. After the fees/commissions it turns out I was actually negative $106 on the month.
How could I not calculate the math correctly?
The Price of Market Tuition
Like I said, math isn’t my strong suit but now I know!
The price of my market tuition is minimal in comparison to the traders who end up blowing up their accounts by learning the wrong lessons. But I HAVE to give all the credit to my dear trading buddy Mariana H. She warned me of her experience with losses from commissions after she thought she was green too. With her guidance; along with, my parents I decided to add $2k to my account in order to trade with enough dollar size to cover commissions and truly follow my rules.
There’s something to be said about trading with size and real money that paper trading doesn’t quite account for. Money management is a good lesson to be learned.
November is ending red for me. This isn’t the end of the world as the tuition is cheaper than it could have been.
With Bigger Size Comes Bigger Responsibility
Rule #1 is #1
Example of why following your plan and following rule #1 is EXTREMELY important!
This is the stock I traded today. I bought 10k shares at .097 risking .095 which was only about 2% risk. My goal was to sell for almost a 7% single at .103. after fees and commissions I ended up with a $31 and some change loss. Had I held to the bottom it could have turned into a 16% loss or $160 loss and after commissions/fees a potential $175 loss! How do I calculate this? Click HERE to use the Percentage Calculator.
I followed my plan to a T and I was rewarded with a small loss. What did I learn from this trade? Tim and others are correct about trading after 2pm EST. The setup is better. Now not every time does this pattern spike after 2pm EST as I have seen them spike before. The afternoon VWAP hold has proven that the stock can rebound and hold thus making it a more ideal setup.
A 2% loss means I am down $20 on a $1,000 position. With fees and commissions that makes this a $32 roughly loss. Had I been correct of the time of my entry and rewarded with .103 then that was almost a 7% gain. I was risking $20 to make $70. After fees/commissions I risked $32 for $55. That is a decent way to grow an account. Turns out this stock actually did rebound, held VWAP and spiked to .1103 making it nearly a 14% opportunity. I could have made $140 minus commissions so roughly $125 risking $32. That is SOLID risk reward. Now I don’t go for the entire move as my goal is to capture a small fraction and once they hit my goal I choose not to get greedy and get out while I am convicted in the current setup.
I am thankful Mariana H (Tims Top Female Millionaire Challenge Student!) kept an eye on this stock and let me know that it was setting up for Solid Risk/Reward as it was 2pm EST. Had I had more buying power and experience then there would be no reason not to reenter for such solid opportunity. This is why I needed to add more money to my account.
This also falls into the controversy of parenting as I decided to take a break from the screens to make lunch for my kid and I completely missed seeing her message. How I could have avoided missing it was keeping my laptop next to the stove or set an alert to let me know when the stock reached VWAP. Essentially, if I wanted to wait for it to setup (or had I thought it would retest vwap and hold then I would have made it available to me to trade it again.) The missing of this stock was 100% my fault and there is no excuse. Good lesson learned.
Focusing on One Setup
Mastering One at a Time
After watching so many videos of Tim’s successful students and chatting with Mariana, Tim’s top female student (in my opinion and as far as I know) it makes a world of difference focusing on your niche setups. If I want to be the best then I need to train like the best and Learn from the best!
Moral of Commissions
Track, Track, Track!
Tracking my statistics has been the biggest improvement in my work as a trader. I use TraderSync to track all of this information and I am thankful that I have al of the features in my Elite plan. Thankfully they were able to point out my profit and loss after I was able to take the time to review my statistics (that was after the YouTube video was recorded). Tracking your trades and your work is Detrimental for a trader to succeed! Plan your entry, exit, commissions, etc and Stick TO Your Plan!