Frog Trader 101 series (1) Brokers--by bobcat

oldfairy

Frog Trader 101 series (1) Brokers

1. Commission For an active trader, the commission you pay to equity brokerage might be the largest expense item in your budget, usually much higher than the mortgage payment for your house.   Hence SAVING on commission might be the single largest saving that you can make. So choose a cheaper broker and don't overlook this matter! Small traders may want to have two different brokers: one adopts per trade commission schedule, and the other adopts per share commission schedule, which is good for trading high priced stocks. For trading penny stocks or options, you must use the former. For option trading, to the best of my knowledge, OptionHouse is the only such broker for the former. Large traders must use the former. Many traders don't know that the commission for most US brokers is negotiable. If you make more than 500 trades per month, you certainly should ask for a lower commission. If you make more than 1000 trades per month, do not accept a commission rate of over $3 per trade. 2. Relation For large traders, a good personal relation with your broker is quintessential. When you need to argue with market makers (MMs) about bad fills, it has to go through your broker. Sometimes, the broker may help you to get thousands of dollars back for you from MMs for bad fills. Unfortunately, for a small trader, it is impossible to receive any attention from the broker. 3. Fill and Report Insist on expedite fills and reports.    4. Direct Routing Direct routing allows you to choose MMs you like. I personally like to route most of my orders to Citigroup. Remember to ask your broker for such privilege. 5. API For traders with computer background, learn something about API provided by brokers. Next time, I'll talk about traders' tax status.