Pick the RIGHT Trading Commission Structure for YOU! Per Share vs. Per Trade

 

What’s up guys! Another very common question I get asked especially as a followup to the dreaded asked-and-answered question “what broker do you use?” (c’mon guys the FAQ was created for a reason, lol…)  is “should I go with Per Share commissions or Per Trade commissions?”  It’s so common that I decided to write this blog to settle it once and for all so that way you guys save a buck in fees while I save myself a headache in having to answer this question for the 789435739th time. 😂😂

Here’s the Good News…It’s Simple Math

What it boils down to is simple math (yeah I think you can figure out by now that I’m a total nerdy numbers guy, which does come in handy as a trader).  You need to simply ask yourself the question: How many shares do I usually trade on average per trade?  The key word here is shares NOT dollar amount as the commissions are determined by the amount of share volume you put into the market not dollar volume.

Thankfully, the math to calculating the correct commission structure to go with is a lot simpler than this!

Does Size Matter? You Betcha!

Here’s an example if you trade larger priced stocks such as AAPL or AMZN chances are unless you got an account so big that you can buy out BRK.A or something, you’re probably not going to be pushing large share volume even if you were trading relative size on those names as 1000 shares on a stock like AMZN is $2,000,000 in principal.  Conversely, if you were trading some penny stock priced at $2, that same 1000 same position is only $2,000 in principal.  So generally speaking, if you trade higher priced stocks, it’s more likely that you’d go with a Per Share commission structure since you’re probably going to be pushing smaller share volume size and if you for the most part, trade lower priced stocks a Per Trade commission structure may make more sense since you’d be more likely to push larger share volume size.

However, a Per Share commission structure may still make sense IF you’re trading small size on average.  How do you define what’s small size in this context?  Take a look at this simple table below.

A simple Per Share vs. Per Trade comparison breakdown and the average “Break Even” position size you need to be trading on average for it to make sense to go with Per Trade, else Per Share is the more economical choice.

This is a pretty simple breakdown of a Per Share vs Per Trade scenario.  To calculate the “Break Even” Share Size, you just simply need to take Per Trade rate and divide by corresponding Per Share rate.  You can see that the “Break Even” point between the Per Share rate of 0.004 and the Per Trade rate of $5.95 is 1,488 shares, which means you need to be trading on average 1,488 share positions for it to make sense to choose that Per Trade rate, if not then it’s the more economical decision to go with the Per Share rate.  Of course, rates will very from broker to broker but the calculation will be universal.

So as you can see you can get draw the general conclusion from all this that if you’re not pushing at least 1500-2000 share positions on average, you’re probably better off doing Per Share commissions.  If you’re a total gunslinger throwing around 5,000, 10,000, or buying the entire 4,987,943 float of a small cap company, then it would probably be more wise to go with Per Trade commissions.

I hope this blog post saves you guys a few bucks and of course stay tuned for more FREE simple and easy tips from your friendly neighborhood daytrader, madaz.  Cheers!


How Madaz can help you

Tired of never having shares to short? Does your broker just plain suck?

Madaz recommends Centerpoint Securities as the preferred broker.


Tired of getting late alerts and getting dumped on by your guru?

Madaz recommends Trade-Ideas as the preferred stock scanner.


Are you often missing big moves because it takes you forever to find out the catalyst?

Madaz recommends Benzinga Pro as the preferred Live News Feed service.


Affiliate Disclosure: I know what you're thinking. Madaz, ya sneaky bastard, trying to sneak in some affiliate links. Any compensation I may receive from this will pay for big macs on days where the market isn't feeling so charitable. For a more complete version of this mumbo jumbo, please click here.




Leave a Comment Below


Latest Posts