It wasn’t too long ago that commissions were just a way of life, a necessary expense for anyone who traded anything.
Nowadays many of the largest brokers don’t charge commissions for trades, and cheap commissions for options trades.
There are even some nifty apps like this one here that you can download, open an account, and trade from your phone, commission-free.
Free commissions have opened the door to millions of traders in this new generation. In the Covid-19 pandemic world of the markets, especially early on, there was no shortage of liquidity and volatility.
In the second quarter of 2020, after what would later become the shortest bear market ever, all you had to do was buy stocks, because well, “stocks never went down.”
That seemed to be the mantra anyway.
Legions of newbie traders came out to trade in a whole new way.
Some might still be, others have made followings out of their ventures, and many others have likely quit the short term hobby and moved on to the next “cool thing” to do.
Regardless, the whole commission story really added more fuel to the fire (lit by the aforementioned trading apps).
It gave this perception that it was a barrier to entry when it was just a cost of doing business in a sense, and now the barrier was gone.
So no better time to trade right?
So why in the world would I still pay commissions when I don’t have to?
In one word…convenience.
Wait…what? Isn’t it inconvenient to pay extra for something that you don’t have to?
It can be but certainly depends on what you are talking about.
Let me explain…
For my intraday trading accounts, I use Lightspeed. They still charge commissions, and they even charge a fee to use their platform, unless you hit a certain commission threshold each month (which I do, and that minimum is $120).
I am on their per-share commission structure, $.0045 a share, minimum $1/trade.
Since almost every trade I take is always 200 shares or less whether entering or exiting a position, I basically pay $1 per trade.
In exchange I get access to a fast and easy to use platform, I have access with one click to both of my accounts via a toggle within the platform. I get great customer service.
I never have to be in limbo about which stocks I can short as they have a request feature, and indicators to identify easy to borrow stocks, all within the platform.
So while the platform hits a lot of benefits, and the way I trade (mostly shorting) is easy to do, you could argue other platforms do the same thing.
One thing I should mention is trust.
I trust Lightspeed, and they trust me. You see when I used to make some dumb trading mistakes in the past, over-leverage my account and get margin calls, Lightspeed was flexible, courteous.
They didn’t just cover my positions, they reached out. They allowed me time to add additional funds to my account.
They did not have to do that at all.
They could just as easily liquidate my position at the worst possible time (for me).
Other times, they actually did liquidate my position when I was, in all honesty, so in over my head and frozen into a position.
They actually saved me from a complete blow up on one occasion.
At the moment I was not happy.
But when all was said and done, I realized how grateful I was they pulled the trigger for me and ended the pain.
Those moments built trust with me.
Convenience and Trust.
I don’t need to change or look for a deal. I don’t mind paying commissions when there are so many others to choose from.
They have helped me get the job done for years, and I am content with what they have to offer because I know how to use the tools, I know what I am getting.
It allows me to be consistent. Why change when I don’t have to.
At the end of the day, I’m getting my share, they get theirs. I don’t worry about counting how much I spend in commissions as I try and trade as few times as possible a day anyway.
Even if I place 30 trades in a single morning, with commissions and fees, it may end up being about $35-40.
Compare that to even paying on a per-trade basis of $3.95 per trade, or before when you actually paid upwards of $6-$7 per trade, and the difference is huge
We’re talking from 30-70% less in that example.
I could never trade the way I trade with a phone app.
And learning a new platform at this stage of the game…not necessary as long as the platform I have now is around.
It’s all about staying comfortable, and aware. Trying to save a buck here and there is spending too much time focused on the wrong thing.
Don’t get me wrong, I am looking to save on trading expenses as much as the next trader.
I use the free version of anything I can. Check out the resources page for more details on that.
So if you are looking for a broker, you know my recommendation.
But if paying zero commissions is important to you, then at least also look for the features that are going to suit your style of trading the most.
If you can score on both those fronts, even better.
Just don’t be totally sold and ready to jump on the no commissions train.
Know what you are getting, or not getting.
Sometimes cheaper isn’t always better or the right way to go, especially in trading.
Every business has expenses.
If you take your trading seriously, (and you should be) like running a business, then you start to look at costs like commissions, fees, subscriptions, etc., as necessary expenses.
This will keep you from jumping in and spending too much on something, or anything really that won’t help you or your business to perform well.
It will also keep you from making decisions solely based on whatever is cheapest, or the best deal, because your trading business may be limited by those options.
When in doubt, realize you can always cancel something if it doesn’t work out.
There are always costs of doing business.
You learn where to deploy your capital on each trade and so too must you learn where to make the best investment you can in a product or service, or yourself (in the form of knowledge and education).
It can be difficult to navigate the landscape of the financial world because it seems that everyone is really out to sell you something, without really understanding your challenges or goals.
The key is in the message.
It’s the only way I do business, and the only way I know to help others.
So whether you focus on every dollar you spend for your trading business or not, realize as you develop and grow, investing back into you and your business should serve you in the best way possible.
It’s more than just deciding to pay commissions or not.
It’s about realizing what is best for you and your trading journey.
Best of luck.