Commission for an active trader is one of the largest overhead costs eating into their % of profits. For a unprofitable traders, it can really accelerate the downward spiral of an account. Like any business its therefore very important to fully understand your overhead costs. To give yourself a full understanding of the commission effect always express the cost of Commission as a % of your Trading profits or losses.
We commonly see profitable traders who are beating the market but their commission is pushing them negative taking up over 100% of their trading profits! The more you trade the more the % magnifies especially when trading small size.
If your trading (DMA) Direct Market Access, you are either charged by the ECN Route when taking liquidity or you're paid a rebate when adding liquidity. What you pay or what your paid is depending on the type of liquidity you provide or take. Different routes have different rates some are completely free.
As a rough rule of thumb expect to be paid $2 per 1000 shares traded when adding liquidity and $3 per 1000 shares when taking liquidity.
To ADD liquidity when going LONG you want to be on the BID to get into the position and then when you want to Sell your long you want to be on the ASK. Please note it will be slower to fill as your waiting for someone to take your offers. To remove Liquidity you want to do the opposite but you will be charged and your fill should be instant.
You might have seen the offer of Commission Free trading at a few discount retail brokers but you’ll notice they don’t offer you your ECN rebate. What they are effectively doing is keeping your ECN rebates when you add liquidity, meaning the broker is pocketing your money!
At TraderEquity we have Ultra Low Commission and offer all our traders full ECN rebates. If your trading by adding liquidity at certain size on certain routes this typically means that your commission costs will be completely covered and leaving money left over! Therefore you are effectively being paid to trade! Saving you thousands to tens of thousands over the course of a year!
Always take the time to work out your overhead costs, we are typically 60-80% cheaper just on commission EXCLUDING your ECN rebates. But when you factor the ECN rebates and the commission reductions over the course of a month or year even with the profit split the savings will be dramatic!
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Please Note: We can NOT accept any US-based traders, this restriction is based on their location rather than their nationality and we can NOT accept any Canadian based traders directly.