Cheap Stock Trading Online... 

Cheap Stock Trading Online Is Now A Reality

What does cheap stock trading online mean to you? Is it the lowest possible commissions? That is what most people will answer but in reality one needs to really think about this question in-depth before committing real money to any online broker.

I say this because individuals that are new to trading will typically gravitate to the broker with the lowest fees. Usually this is a fixed fee like $4.95-$9.95 per trade and may include exchange fees in this price as well.

Now, if you only trade once a month or even once a week this might be OK for you but what if you trade daily and in small lots of a few hundred shares?

As an example let us suppose that you trade 3 times a week buying on average 200 shares with a broker that charges $9.95 per trade. This means your weekly trading costs would be (rounded to $10 for ease of calculation) $60 because you had three $30 buys and three $30 sells. Do you think this is cheap stock trading?

Now let’s compare with a deep discount broker that doesn’t advertise on TV but only charges .01 a share. Our total trading costs are now $12 for the week because we bought a total of 600 shares and sold those same 600 shares giving us 1200 shares x .01.

This is a difference of $48 a week or about $2,500 a year! Now that is cheap stock trading isn’t it?

The point I am trying to make is that when you see a TV ad promising you cheap stock trading commissions you need to analyze how often and how much stock you actually trade because if you fail to do so you can easily end up paying more in charges than you need to.

Of course, if you trade several thousand shares at a time cheap stock trading online for you would obviously be a flat rate commission because your per share costs will be much lower. There are some even some online brokers that let you trade for free if you maintain a high account balance or trade very frequently but these types of accounts are for the heavy-hitters and most of us don’t qualify for them.

The bottom line is the reality of cheap stock trading online for you can be vastly different than other traders as each of us trade differently and as such each of us has a different optimal commission structure that gives us the lowest trading costs.