Do NOT trade at Fidelity, Ameritrade, Schwab or ETrade
I recently signed up for a StockTickr account. For those of you not familiar with it, it’s a very robust tool where you can import all your trades directly from your brokerage statement (assuming you use one of the brokers they support) and then view statistics on your trades. Furthermore, you can “tag” trades for different systems. I wanted to use it so I can see the performance I’m getting from my swing stuff versus my trend following versus my intraday trades.
After I loaded up all my trades (took about 15 minutes for YTD from IB), I started playing with the commission calculator which is designed to let you plug in different commission structures and see if you would have saved money versus what you current pay.
For stock trades only (no futures or options), I have incurred $972.86 in commissions at IB year to date. If I was paying $6.95-$9.95 per trade (current going rates at the aforementioned brokers) I would have paid between $5,831.05 and $8,348.05 in commissions. This means I have saved between $5,000 and $7,000 by using IB.
If any of you reading this are still using Fidelity, Ameritrade, Schwab, Etrade or anyone else charging $6.95+, please do not make another trade until you’ve moved your account to a more reasonably priced broker. This is especially true if you’re a subscriber to our collective2.com system as the amount you’ll save over the course of a few months will more than pay for the entire years subscription fees.
- John
Sunday, October 21 7:03 pm
John,
Thanks for the info. I’m with Fidelity and I’m not a very active trader, so the difference is not that astounding, but still I could have saved some. However, in my case, there are other considerations:
- Good customer service at Fidelity
- Unused cash in my account generates better interest than most other online brokerages, and FDIC insured (up to the limit.) Does IB pay interest on unused cash?
- I can use TurboTax to download my annual trades directly from Fidelity, and all calculations (including wash sales) are done automatically by Fidelity, so my tax preparation is pretty much effortless. Not sure if I can download options trades, since I’ve never played options. According to some surveys, Fidelity is the best for trading account records and ease of tax filing. Does IB offer similar services?
- I can use Wealth-Lab Pro (free) to learn system trading. Correct me if I’m wrong, but I believe you have to have an account with Fidelity to use Wealth-Lab (if you live in the U.S.) You use Wealth-Lab also, so I assumed you have a Fidelity account.
In summary, I think if I’d ever trade as actively as you do, then the savings in commissions may outweigh all of the above benefits at Fidelity. In my case, though, this may not be necessarily true.
Sunday, October 21 8:50 pm
Ken,
Everything you mention are valid points. However, when it comes to maximizing returns, people often overlook the true cost of their commissions. On our sample portfolio at collective2.com, which will do about 300 trades per year, Fidelity’s $8 per trade would be $4800 ($8 each way), while something like IB that would average closer to $2 per trade would be $1200. That’s a difference of over 3%+ per year which of course is huge.
I’m sure everyone’s seen the chart of what an extra 3% per year does to compounding rates of returns.
I’m more than willing to all my tax filing trade by trade with a pencil and paper for a guaranteed extra 3% per year.
- John
Monday, October 22 12:29 am
John,
You’re quite right. In my case, it’d amount to ~0.8%/year. Still, that’s significant over the long term. Perhaps I’m paying too much for convenience and laziness
Do you use Wealth-Lab for intraday trading? So far I’ve only traded using daily/weekly charts, but starting to experiment with intraday system trading recently. I’ve noticed sometimes the system (WL and ATP) hangs up and needs restarting, a few times per week.
Some people have also reported this issue on Wealth-Lab site. Just wonder if you’ve ever experienced the same problem. And how does WL/ATP real-time trading compare to IB? Any pointer is much appreciated.
Monday, October 22 9:58 am
Ken,
No, I don’t use Wealth-Lab for intraday trading at all. If you’re trying to automate intraday strategies, I’d recommend looking at either Amibroker or Right Edge Systems which have are more focusted on intraday than WL.
- John
Monday, October 22 2:25 pm
John,
Thank you very much for your info.
Ken
Tuesday, October 30 9:53 am
I don’t know if this is a dead blog or not, but I am looking to begin trading and am currently trying to decide which firm to go with. I am a student and most definitely only start with a few penny stocks to get my feet wet. So I was wondering what this means for me. From reading this, I was able to see how much I could be spending even doing just a few trades each quarter and I don’t want to get in far over my head at this point in my life.
Tuesday, October 30 4:46 pm
Certainly not a dead blog. Why would you only trade penny stocks? Remember it is the percentage the equity moves not the number of shares you own that matters.
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