Tuesday, March 03, 2015 5:18:48 PM
Hi Allen, Re: Commission cost as a percentage of Order Value......
Generally I used to attempt to keep the commission cost at less than 1% of the trade order value. That would mean a $1000 trade as a minimum at TD. To go from your current trade amount of $185 to $1000 would probably put the "next sell" price well beyond its suggested sell price/share and negate the trade.
Remember that you pay commissions in both directions, so 5% in each direction would eat seriously into your overall profit. Keeping track of the gross and net cost on transactions will help guide your hand. Ameritrade's Gain/Loss page can help, too.
If you and AIM are making just $15 on the trade and AMTD's making $10, that's not a great ratio.
Of course much depends upon the way you calculate profit - LIFO, FIFO or Average Cost. We talk about AIM's LIFO gain target being ~20% to 30% generally, but we don't pin that down to dollars very often. That would be ~$100 to $150 on a $500 trade. Even there the $10 commission is a big chunk of the gross profit.
So, order size matters on commission based trades. There are some "fee based" brokers around and if you're a day trader they might work okay. To pay 1% to 1.5% of the value of the portfolio annually as a fee would require a lot of transactions to pay for itself, but if there were going to be dozens of small transactions it might work.
Over the years I think I averaged less than 1% total commission cost on a round trip basis. That required trade values above $2000 per transaction if I remember correctly.
Hope this helps.
Generally I used to attempt to keep the commission cost at less than 1% of the trade order value. That would mean a $1000 trade as a minimum at TD. To go from your current trade amount of $185 to $1000 would probably put the "next sell" price well beyond its suggested sell price/share and negate the trade.
Remember that you pay commissions in both directions, so 5% in each direction would eat seriously into your overall profit. Keeping track of the gross and net cost on transactions will help guide your hand. Ameritrade's Gain/Loss page can help, too.
If you and AIM are making just $15 on the trade and AMTD's making $10, that's not a great ratio.
Of course much depends upon the way you calculate profit - LIFO, FIFO or Average Cost. We talk about AIM's LIFO gain target being ~20% to 30% generally, but we don't pin that down to dollars very often. That would be ~$100 to $150 on a $500 trade. Even there the $10 commission is a big chunk of the gross profit. So, order size matters on commission based trades. There are some "fee based" brokers around and if you're a day trader they might work okay. To pay 1% to 1.5% of the value of the portfolio annually as a fee would require a lot of transactions to pay for itself, but if there were going to be dozens of small transactions it might work.
Over the years I think I averaged less than 1% total commission cost on a round trip basis. That required trade values above $2000 per transaction if I remember correctly.
Hope this helps.
Best regards,
Join the InvestorsHub Community
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
