Day Trading/brokers

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Question
What's been a good discount broker for you?
I use Fidelity.  Slippage seems high.
I try to buy a stock at 44 (limit)
  when I buy it at market it's 45

    I think they sell to me at   Ask
but when I sell to them they only give me the BID price
  Do all brokers do this?

       Thanks   Dick

Answer
Hi Dick,

Good question. Let me give you an example to help make this easy to understand.

Let's say you are at a garage sale, and you see a piece of furniture that you like. The seller says you can have it for $50 (the ask), but you're interested in paying $30 (the bid). You know that the EXACT same piece of furniture was sold by the next door neighbor for $40 (the last trade). So you think you might be able to get a better price than $50, but paying $30 might be unrealistic. So you raise your offer to $40 (the bid) and you say you're only interested in paying $40 or less (a limit order). The seller says I wanted $50 but I'll take $40 since this is what you're willing to pay right now (a sell market order).

Now if you liked the idea of paying $30, but you said I want to buy the piece of furniture right now at the price you're willing to offer (a buy market order), you'll buy the piece of furniture for $50.

So you will always buy at the ask and sell at the bid when you use market orders. If the market is moving you might get better fills than you expect from time to time, but using market orders your broker is doing what you're telling the broke to do...Fill me NOW and don't worry about price. So this doesn't matter if you're using Fidelty or another broker.

To combat this issue you can do 2 things:

1) Use limit orders (you're picky with the entry price but at times you might not be filled).
2) Trade stocks that are more liquid with tighter bid/ask spreads ($1 slippage is a lot but might be normal if trading small cap stocks and/or low volume ETFs).


If you're having other issues with the broker and interested in looking elsewhere, you might want to take a look at Interactive Brokers.

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Mark Hodge

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Questions related to technical analysis, strategies, risk, trading plans, trading psychology and money management. Experience in trading all markets and time-frames with expertise in futures (e-minis, currencies, commodities) and equity options. Unfortunately I am not allowed to offer any specific trading advice (i.e. should I go long the E-mini S&P today).

Experience

I have been involved in the industry since 1995 working for Morgan Stanley Dean Witter and American Express Financial Advisors before becoming a full time trader. As Head Education Coach with Rockwell Trading I have coached hundreds of students around the world to achieve their trading goals with simple strategies, a sound trading plan and proper money management for the leveraged markets.

Organizations
Currently serving as Rockwell Trading's Head Education Coach www.rockwelltrading.com and moderator for Rockwell's Student Trading Room where we follow opportunities in the minis, interest rates, currency and grain markets daily.

Publications
Technical Analysis of Stocks & Commodities, "Day Trading With Volatility", June 2010 SFO Magazine, "Home on the Range: Lasso Trades Without Time", August 2010 SFO Magazine, "Day Trading Indicators, Part 1", January 2011 SFO Magazine, "Day Trading Indicators, Part 2", February 2011 SFO Magazine, "Technical Strategy", April 2011 SFO Magazine, "Advanced Trading Techniques - Futures Spread Trading", October 2011 Active Trader, "A Simple Day-Trading Strategy", November 2011 Marketplace Books, How to Trade Commodities: Simple Strategies for Gold and Crude That Traders Can Use in Any Market, June 2011

Education/Credentials
Formerly licensed as a financial advisor with Series 6, 7, and 63 licenses. B.A. in Organizational Communications with a Business Minor from California State University, Sacramento.

Past/Present Clients
I have worked with institutional traders, brokers, proprietary trading firms and private traders.
One of the few distinguished World Cup Advisors www.worldcupadvisors.com

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