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Risk And Stock Trading Fees: The Two Barriers To Overcome If You Want A Successful Trading Career.
By: David Jenyns
You know the old joke:
"How do you make a million in the stock market? Start with two million?"
There is no way around it, risk and stock market fees are a part of trading that
you can`t avoid. But, you can manage your risk. You can also manage the
brokerage stock trading fees that eat away at your trading float. All it takes
is some planning and making good choices.
If you think you`re ready to start trading, look carefully at where you`re
getting your money from. Maybe you`ve been considering trading for a while and
built up some savings. That`s good planning. Or maybe you`re considering
borrowing money. This is generally a bad idea. Maxing out your credit cards is a
quick and easy way to get cash, but the effects can be devastating.
It`s hard enough to worry about making trading profits along with the stock
market fees you have to pay. But, worrying about the debt servicing on your
credit cards builds too much stress. You will be too concerned with making
payments to be concerned about good trading. Don Miller talks about this in
Trading Markets World Meet the Traders when he tells new traders to worry about
trading well, not making money. One of the best ways to learn trading is to
begin on a part-time basis. This allows you to hone your skills while you still
have an income stream. As a trader, you need to realize the risk you`re taking
by simply putting your money into the market.
With good money management, you`ll be able to limit your risk. But, there is a
kind of risk that can`t be minimized, and that`s "market risk”. This is the risk
that the market might not be there tomorrow. Just by putting money in the market
you are putting it at risk, so make sure you only trade with money you are
willing to lose. This isn`t to say that you are going to lose all your capital -
it`s just to say that you need to be able to focus on trading well, not trading
to make money. See, you can only do this if you work with money you can afford
to lose.
Once you`ve got your capital together, you can consider the next barrier to
trading, stock trading fees. Although there is no perfect amount of capital to
start trading with it`s no secret that the bigger the trading float you begin
with, the easier it is to trade and the less percentage of stock trading fees
you will have to pay. This is because of the single biggest expense in trading -
brokerage stock trading fees.
Every broker has many different stock trading fees, but many charge flat stock
trading fees per trade. These flat stock trading fees are easier on traders with
larger fund sizes. For example, to obtain a better understanding on how stock
trading fees work, let`s consider two traders. One is starting with an opening
position of $1,000 and the second is starting with an opening position of
$10,000. All traders are charged flat stock market fees of $100. So, our first
trader, with a position of $1,000 has to make back ten percent of his float on
each trade before he breaks even. But, our second trader only has to realize a
one percent gain to reach his break-even point. This doesn`t mean that you can`t
start trading with a smaller float, but if you do you are at a bit of a
disadvantage.
However, you can use your trading float size to help determine your trading
system. If you have a very small trading float, it`s recommended that you look
at a long-term system. With a long-term system, you will be incurring far fewer
stock trading fees. A short-term system, where you are receiving lots of buy and
sell signals will chew up your trading float very quickly with the cost of the
different stock trading fees.
This is why short-term systems, such as day-trading, are best suited to larger
trading sizes - it is easier on the stock trading fees. I actually recommend
that when you begin trading that you look at a longer-term system. You can
manage a long-term system while still working full-time. Once you are successful
with the long-term time frame, you might look at moving to a shorter-term system
and focussing more time on your trading.
You can mange both risk and stock trading fees with planning, and by making good
choices. Your level of capital will be set by what you can afford, and what you
are comfortable risking. How that capital grows will be set by the time-frame of
the systems your planning to trade, and the instruments you trade with. from
winter's barrenness, they desert us too quickly!
About the Author:
David Jenyns is recognized as the leading expert when it comes to designing
profitable stock trading systems. Discover the "secret formula" of trading that
anyone can use to consistently generate BIG profits. http://www.ultimate-trading-systems.com/stocks.html |
