11/20/2019: As a result of the impact that institutions like Robinhood has had on the brokerage industry, I have decided to reverse this move.
Being an active stock trader and having initially established myself as a saver, the cost of trading is important to me, therefore I periodically assess it. My biggest cost of operating as a trader is commissions and each time I assess those numbers it is mind-blowing to me as a saver. There are periods when the average number of trades I do in a day is fairly high, which is not unusual for my style of trading which forces me to churn positions throughout the day. Unfortunately, this means, I am also lighting a daily bonfire using dollars as a result of commissions.
I have been fortunate to have brokers give me deeply discounted rates because of my activity, and this is a result of periodic negotiation of rates. This year, I decided it is time to take my active trading to Robinhood. Robinhood is a no-commission brokerage firm that has been available to the public from around 2014/15. I have been using it for a while for long term investments because until now, it was not feasible to use it for active trading such as what I do.
In an effort to avoid revealing my commission rates here for many reasons, I will use what I know a lot of active traders typically pay, which is $4 per trade. If I am doing 100 trades a day and paying $4 in commissions, that means each day I am giving away $400 as the cost of business. In a year like 2019, if I am trading each market day, it means I will be giving up $100,800.00 ($4 commissions x 100 trades x 252 trading days). Adjust those numbers based on your frequency and commissions rate, but imagine traders that have periods where they may do 500 plus trades in a day. This is serious money that one could keep in their pockets.
Over the time I have been trading, I have traded with a number of brokers including full-service as well as discount brokers. I have been through phases where I utilized some of the offerings of said full-service brokers, but I have gotten to the point where I hardly even make a phone call and as a matter of fact, it has been decades since I have entered any brokerage firm’s office. I have found that all I need is a place to facilitate my trades and so to keep some of that money in my pocket, I have moved my active trading to Robinhood. I will explain how I did it in the next post.