Commission Costs in Trading: Understanding the Expenses

Trading is very difficult. Not only is it difficult to find profitable strategies, but you also have to overcome slippage and commission costs. Slippage is difficult to estimate.

Commissions costs, however, are easy to calculate. Personally, I pay .001 per share in clearing plus ECN rebates and taxes/fees.

So far in 2012, I have paid 6 725 USD in clearing and fees. That equals about.0028 per share (trading is very slow at the moment so not many shares traded this year). The reason I pay so much (considering my clearing fee is .001) is that I remove a lot of liquidity – the opposite of rebate trading.  SEC fees etc. also add up.

In addition, I have paid about 250 USD a month for quotes.

This illustrates how much money one has to make just to break even to keep up with the costs! And this is just a fraction of commission costs compared to 2008 where I traded many times more.

FAQ:

– How can traders calculate commission costs in trading?

Commission costs in trading can be calculated by considering factors like clearing fees, ECN rebates, taxes, and other associated fees. Typically, traders calculate the cost per share traded.

– What is a common commission cost structure for traders?

A common commission cost structure for traders may involve paying a certain fee per share traded. In the example provided, the trader pays .001 per share in clearing fees.

– Why do some traders pay more in commission costs than others?

Commission costs can vary among traders depending on their trading activities. For instance, traders who remove liquidity may incur higher costs compared to those involved in rebate trading.