-- more than 50,000 shares of OTC stock --
Well sure, if you're not trading real stocks and just gambling, than no, IB wouldn't be the way to go.
But on real stocks, entries and exits are more important. Let's say you're trading 10,000 shares, so commission on a round trip is $105 or for all practical purposes a penny a share. So once you're up a penny you're flat in the trade and two cents puts you in the green. Let's say you're trading the QQQ and doing 3 cent scalps and pocketing $200 a trade. Do that once an hour or 6 times a day. That's $1200 a day. WHOA!!!! I never did the math on this one before. That's $300,000 a year. Wow, this could have possibilities. Going to have to think about this one. Hm, using daytrading margin to the max, 4 to 1, would need about $100,000. Not a bad return for 3 cents at a time.
Sure commissions would run $150,000 a year, but I've said it before and I'll say it again, if I'm making that kind of money, I don't care what the commissions are. And if you're spending that kind of money, I bet you could get your broker to give you a special deal. But back to the point about the entries and exits, if you can manage to squeeze out 4 cents a scalp, there's an extra $150,000 a year or your commission costs. So once your trading costs is down near a penny a share, than your executions, your entries and exits are more important.
Pondering this a little more, the 3 cent scalps 6 times a day on the QQQ, scaling back to only 1,000 shares would up were trading costs to 1.5 cents a share, and your take to only 1.5 cents, or $15 a trade, $90 a day, $450 a week or $22,500 a year (50 weeks). Not bad. And Ameritrade at $22 a round trip would be $7 more a trade, $42 a day, or $10,500 a year leaving you with only $12,000. Still not bad, but it ate almost half your profits.
Running the numbers on 5,000 share trades versus Ameritrade, would be $55 vs. $22, so Ameritrade would save you about $50,000 a year in commissions. Then it would depend on the quality of executions. If for some reason you couldn't get the trades you wanted to at Ameritrade, the potential $50,000 in savings would be meaningless. But if you could, the that would add 25% to your $150,000 a year at IB, putting you at $200,000.
But how about this for a scenario. After you get in with 5,000 shares, put a sell for 2,500 at 3 cents up and 2,500 at 6 cents up. All you would need is 25% of those to work and you would make back the Ameritrade (all 5,000 at 3 cents up) commission savings. And anything over 25% and you're in the green. Lots of possibilities. Thanks for the idea. ;-)
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