Cost of Trading

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Cost of Trading

The cost of trading includes more than commissions, fees, and premiums. The cost of trading takes in all monies paid and foregone in the pursuit of opportunity in trading stocks, commodities, futures, and options contracts. Online brokers can attract clients with the promise of low commissions. Although commissions count in the cost of trading they can pale in comparison to the cost of trading in low volume with large spreads between bid and ask prices if traders do not place limit orders. The cost of small cap stock investing especially can mount up if volume is low and liquidity nil. Part of trading analysis needs to extend beyond the spot price and the strike price, beyond Candlestick chart analysis and fundamental analysis to look at the cost of trading in various markets and conditions.

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Cost of Trading

  1. 1. Cost of TradingBywww.CandlestickForums.com
  2. 2. The cost of trading includes more thancommissions, fees, and premiums.www.CandlestickForums.com
  3. 3. The cost of trading takes in all moniespaid and foregone in the pursuit ofopportunity in trading stocks,commodities, futures, and optionscontracts.www.CandlestickForums.com
  4. 4. Online brokers can attract clients withthe promise of low commissions.www.CandlestickForums.com
  5. 5. Although commissions count in the costof trading they can pale in comparisonto the cost of trading in low volume withwww.CandlestickForums.com
  6. 6. large spreads between bid and askprices if traders do not place limitorders.www.CandlestickForums.com
  7. 7. The cost of small cap stock investingespecially can mount up if volume is lowand liquidity nil.www.CandlestickForums.com
  8. 8. Part of trading analysis needs to extendbeyond the spot price and the strikeprice,www.CandlestickForums.com
  9. 9. beyond Candlestick chart analysis andfundamental analysis to look at the costof trading in various markets andconditions.www.CandlestickForums.com
  10. 10. Commissions and fees are somethingthat you will see on the printout of yourtrades.www.CandlestickForums.com
  11. 11. Commissions have certainly come downfrom what they were years ago althoughfees are still with us.www.CandlestickForums.com
  12. 12. This is part of the cost of doing business.www.CandlestickForums.com
  13. 13. For the active trader it makes all thesense in the world to trade blocks ofequities at a flat rate instead of apercentage.www.CandlestickForums.com
  14. 14. It may seem that sufficiently successfulstock picking, options trading, orcommodity investing is all that isnecessary but all costs should be takeninto account.www.CandlestickForums.com
  15. 15. The premium paid in buying calls andbuying puts will vary with the price ofthe underlying equity.www.CandlestickForums.com
  16. 16. It is a larger cost of trading for theunwary trading in hope of a market rallyor collapse. Profit is gain minus cost,every cost.www.CandlestickForums.com
  17. 17. Only using limit orders instead of buyingand selling stock or other equities atmarket price should be a daily practice.www.CandlestickForums.com
  18. 18. The spread between bid and ask price isthe difference between what sellers areoffering at and buyers are offering.www.CandlestickForums.com
  19. 19. In a slow market this difference in pricecan be rather large.www.CandlestickForums.com
  20. 20. Also the number of stock shares beingoffered or bid for may be relativelysmall.www.CandlestickForums.com
  21. 21. This presents two problems that affectthe cost of trading.www.CandlestickForums.com
  22. 22. A trader who buys and must promptlysell equities will pay the differencebetween bid and ask price for thisexperience.www.CandlestickForums.com
  23. 23. This cost can be substantially more thancommissions and fees, especially on lowcap and penny stocks that are alreadythinly traded.www.CandlestickForums.com
  24. 24. The other issue is one of availability. Ifthe trader places a large order to buy orsell there may not be enough of theequity available.www.CandlestickForums.com
  25. 25. The depth of the market is not verydeep.www.CandlestickForums.com
  26. 26. Thus your stock order, or futures ordersor options orders, will not be completelyfilled.www.CandlestickForums.com
  27. 27. If you have not placed a limit order thereminder of your sale or purchase maybe completed at disadvantageous prices.www.CandlestickForums.com
  28. 28. If you are thinking of making a trade atmarket price the market can change inthese circumstances to your distinctdisadvantage.www.CandlestickForums.com
  29. 29. The cost of trading should go into longand short term assessment of whatmarkets you trade,www.CandlestickForums.com
  30. 30. if you wait for high volume and highliquidity to trade, and if you sit out somemarket conditions altogether.www.CandlestickForums.com
  31. 31. Online Stock Market Reviews presentedlive via the internet by Stephen Bigalowwww.CandlestickForums.com

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