Day Trading and Commission Fees

By | December 25, 2016

Imagine you were a day trader, and you make in average one trade per day on 200 days a year.
Further imagine you have to pay a commission fee of $10 when buying shares, and again you have to pay a commission fee of $10 when selling shares, which is effectively $20 per trade.

So you can simply calculate: You will pay $4,000 per year in commission fees.
Or in other words: You have to make with your trades a profit of at least $4,000 a year to make no losses.

And now take a look at your account balance.
If  you start with $1,000, you have to have a yearly performance of 500%, which would results in a profit of $4,000, only to pay the commission fees. You are only on the winning side, if your performance is better than 500%.

If you start with $10,000 you have to raise your account only 40% up ($14,000), to pay the commission fees to make no loss, but still no win.

And last: If you start width $100,000, your performance has to be at 4%, to pay the commission fees.

So remember: Your biggest enemy are neither the other traders, nor the trend or whatever, your biggest enemy in dat trading are the commission fees in relation to your trading capital.

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