Review of online stock trading comparison::What Time Does the Bond Market Close?
Review of online stock trading comparison::What Time Does the Bond Market Close?
Many newcomers to stock trading cannot tell the difference between a proprietary trading firm and an online (retail) broker. When deciding to open an account, traders make their comparison of brokers based on the relative cost and the products offered, but more often than not they fail to realize that the products are not exactly the same. This article seeks to shed light on the mechanics of a prop trading account and educate traders about the differences between the two options so that one can compare them more effectively. The analysis has been provided in six key areas: software, rebates, fees, buying power, education and short locates (availability of hard to borrow securities). These are the areas in which the two are most distinctively different and are rightfully the most common factors considered in this decision. You as a trader will place a different emphasis on particular categories as you consider whether retail or prop is best for you. Software Retail Retail brokers typically offer the ability to execute trades on their website. Most also offer their own trading platform at a monthly cost to the trader. This fee may be waived if you meet their minimum requirements for account assets. Prop A good prop firm will offer traders a choice between a few different direct access routing programs. A trader's platform provides the ability to execute and monitor transactions quickly and effectively. A proprietary platform will have direct connectivity to the exchange matching engine. Hot keys are also a must have for intraday traders and are a feature offered in proprietary software, but not often that of retail firms. Most proprietary trading platforms provide access to more in depth real-time market data such as NASDAQ's Totalview, ARCA Book, NYSE OpenBook, BATS and Direct Edge Books, although some of this data may come at an additional cost. Greater market depth and breadth can assist the trader in making better trading decisions on very active and heavily traded securities in real-time. Rebates Rebates refer to the compensation that ECNs provide to traders who add liquidity to the market. Most ECNs give rebates to traders who add liquidity and charge a slightly higher fee to traders who remove liquidity from their market center. This is a basic ECN business model, although there are a few ECNs that are structured differently. Retail In the vast majority of cases, retail firms do not pass on rebates to their traders. The online broker will most often route the flow to a low cost exclusive destination which does not cost extra and is not often directly to an exchange. If a retail trader chooses to route to a particular ECN, the additional fee on top of their flat commission rate may be passed through to the trader. Prop Traders who trade at a proprietary trading firm get the advantage of benefiting from the widely adopted "taker-maker" model that most exchanges offer. Traders who add liquidity will receive rebates for doing so in accordance with that exchange's rates (which can be as high as $3/1000 shares). This can be a substantial source of revenue for the prop trader and will also influence his/her decision of which route to use. Fees Retail The fee structure for retail firms will vary from shop to shop and the industry is highly competitive. One firm may offer no account transfer fees while another may advertise no inactivity fees. Still another may not charge for wires, but they may make this up in their commission structure. In general, retail firms have a flat, per trade commission rate that is charged. There is also usually a software fee for the platform unless you meet certain minimum asset requirements or if you are a very active trader. Some other incidental fees that you may incur are those that have been mentioned above. Prop Proprietary trading firms are able to offer more competitive commission and transaction fees than the online broker. Proprietary firms typically use a per share structure with breakpoints for decreasing your commission as your volume increases. This is often a direct benefit to intraday traders who have a high number of trades per day. All prop firms charge a software or desk fee which goes to pay for the data and order entry software that the firm uses. Some offer this software "at cost" to their traders and some charge a premium on top of their cost. The variety of routes offered directly affects the desk fee as well, so ask your prospective shop about the routes available when talking about desk fees. For some traders, more routes is more value added. Day Trading Buying Power Retail In retail accounts, your buying power is THE LESSER OF the equity in your account divided by .30 (the 30% minimum global margin requirement for equities) OR your SMA multiplied by 2 (which satisfies the Regulation T requirements for equity purchases). For day traders, you must have at least $25,000 in equity in order to do more than three round trips (day trades) in a rolling five business day period (FINRA Rule 2520). Outside of this model, certain accounts may be eligible for portfolio margin. Prop With a prop firm, your buying power is determined by the firm you're with and the risk capital deposited. Some traders may be fully backed by a firm (true prop) in which case they can expect the firm to take a portion of profits to compensate for the risk taken. Many traders find trading prop more advantageous as they can trade a lot more capital that they would have access to in a retail account. Day traders with less than $25,000 are prime clients of prop firms as they are able to trade freely without worrying about the minimum equity requirements enforced by FINRA Rule 2520. This is because most prop firms are set up so that traders trade sub accounts of the firm, but the firm "hits the street" as one large account. Education Retail Many retail firms have educational information on their website. The breadth, depth and level of educational materials vary from firm to firm. The material is usually in the form of suggested reading, archived lessons and, occasionally, trading seminars. Prop Offerings for training in the prop field are highly sought after. Many traders who are beginning their trading careers look to prop firms with advertised training programs. Be cautious of firms that charge for educational classes and then provide firm capital for you to trade. Some of these firms are modeled to generate revenue from training which can cause a conflict of interest as their incentive to see traders last in the long run is greatly reduced. When a trader joins a prop firm and deposits risk capital, all compliant firms are required to hold your deposit for 12 months. Afterwards, the trader may receive his/her deposit back. In short, be aware that if a firm charges for training they may be trying to avoid the lock up period so they can treat it as revenue immediately. Shorting/Locates All traders, prop and retail, are subject to Regulation SHO which governs short selling in US markets. Traders must have located shares that they wish to borrow before selling short. Some stocks may be on the threshold list or "hard to borrow" list and may not be available. This list is updated every 24 hours. Retail If a retail trader would like to short a stock on the threshold list, there may be little that can be done to locate additional stock intraday and an opportunity may be missed. Prop Traders with a prop firm may submit locate requests before and during market hours in order to locate additional shares of stock on the threshold list. As it happens, most traders begin trading in retail accounts due to their accessibility and pervasiveness in the investing community. Too many traders are unaware of the options available to them when it comes to cost structure, service and performance. It is my hope that this article will dispel some of the mystery and stigma from prop. Looking at these six areas, you can better determine if your style of trading is more suited for a prop account, or if you would be better off opening an account with a retail broker. When choosing a firm in either category, research is paramount. Make sure your broker or trading desk has a sound reputation and make sure to ask the right questions. Talk to traders or read reviews on forums and trading websites. The better informed you are from the onset, the better your experience will be and the more comfortable you will be doing business with them. Happy trading. |
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Review of online brokerage accounts::What Is a Brokerage Fee? - What's Your Question?
Review of online brokerage accounts::What Is a Brokerage Fee? - What's Your Question?
It might be time for a Penny Ponzi Pyramid Scheme on the Internet. One could promise to pay 100% interest on a penny sent to a paypal account . I once had a mail art project where I got pennies sent to me from all over the world . I got a lot of decorated pennies in the mail including some transformed into collage animals with glued on features. The deal was I had to send a penny back. Postage is way too expensive to mail pennies at the price of mailing an envelope. A think a penny pyramid scheme would be really wonderful If I could get it to work with paypal. I called may mail art project LL Penny's Pennies from Heaven since most flew in air mail. A lot of people sent me pennies, pennies and more pennies. Paypal ponzi penny pyramid project? If I offered 2 cents for every 1 cent invested allowing for people to deposit only one cent and no more to the project how long would it take me to go broke if I were honest? It would not be proper ponzi pyramiding if I proposed to pretend I was proper. What fun would that be? What ? You have never been played by a ponzi pyramid plunderer? Is there some way I can list that on Ebay? I did sell Lehman Brothers on ebay but am still not aware that I ever got paid. I saw some small town in Pennsylvania was selling the right to name streets in the town on ebay and had plenty of bidders. Why is Portland bothering with Chavez Street when it could put streets names up for sale in a bid crazy world of ebay? Some Idiot could put up an " advertise here " ebay auction for the right to put an epitaph on people tomb stones . I can see it now. "Joe Smo 1978-2008 --Coke is the real thing" carved on a granite tomb stone." It could even have a carved picture of the classic coke bottle. That would not compare with selling a service generating 100% interest returns on a penny. The problem with most pyramids schemes is they really are not what they are advertised to be, The promoter usually intercepts the puffed up pool of cash long before the final investors have a chance to get their 100% profit. It reminds me of the Bernanke/ Paulson bail out plans where the 700 billion went into banks that immediately stopped lending money as soon as they were solvent again with that new money. That is where I got the idea to sell Lehman brothers. I drew up a certificate and mailed it. i suppose the buyer , who many never have paid me might resell it? I made a big round hole in the certificate with a giant hole punch to demonstrate the value of the underlying assets. You can't beat the federal government for running a ponzi scheme with it's social security promises and no underlying assets....not even Bernie Madoff can compete with a multi-trillion dollar ponzi scheme like that one. There really needs to be a really good inexpensive ponzi pyramid scheme online anyone can afford to loose a few cents in. I was thinking of creating just such a site but suspect it may be illegal. Here is how it might work: Anyone could send a penny to my special designated ponzi penny paypal account. Every fourth penny contributed would immediately be compensated with two cents back the other two cents would be retained by the site when the site has retained ten dollars in cents it will automatically pay the person paying in 1 cent 2 dollars and retain the 8 dollars for my charity called Ducks for A Bad Cause. If you lived in Portland long enough you might know something about Ducks For A Bad Cause or may even own one of our fund raising ducks? Never mind what it is . It is a charitable bad cause. When the pot is paid out, it starts again automatically. The paypal based site would be blind so that those sending in their cents would not know what number of cents proceeds their contribution. That sounds like a pretty good ponzi scheme whose time has come. I would even be a better scam if the big payout was 10 cents when the pot finally reached 100 bucks paying $99.90 to my private account. Every fourth person would get 2 cents for 1 in this scam and other three would just loose a stupid cent. The really luck person would get ten times their money. Double Your Money! Oh yeah. Another great site would be an INTERNET coin flipping site where you could bet on heads or tails with a cent. If it were heads the site would automatically pay you back two cents or give you two additional coin flips. If the coin flip turned out to be tails it would debit your paypal account for an extra cent above your original ante. Roughly, if it were a fair online coin flip, every other flip would offer a 50/50 chance of winning two cents or loosing two cents. After writing this I finally got around to taking advantage of the free $25 to fund a FXCM micro forex currency trading account on the CNBC trading contest site. I quickly lost most of the 25 dollars having no idea what I was doing . I bet their money on trading buying and selling yen and euro us dollar contracts. I started out OK turning 25 dollars into 32 or 35 and then continually bet wrong . After 4 mini margin calls I ended up with less than $4 in the account and it is too little to trade with so I think I am done with currency trading now? Trying to predict short term market movements in currency exchange is harder than predicting the outcome of flipping a coin even with real time charts ticking in front of you. It is worth trying so long as they are offering free funded accounts of $25 each. It is a great real life link to the real time currency exchange that comes in the download. I sill have $3-$4 in the account an am tempted to try again becuse i did win for a while playing the game but then again probably not. Too bad they just don't refund the free money they give you so you can try again. Otherwise they do have practice accounts that may not require any cash of any sort to try it. If the FXCM micro forex currency offer is still available go to cnbc.com and find the million dollar trading contest, Unfortunately it is not a tiny ponzi penny scam but It can be funded for a few dollars for the fun of loosing money and the system is devised such that you get margin calls that wipe you out long before you have to pay in additional funds to cover losses. I do admit that the idea of leverage trading of currencies in this manner makes no sense to me. A better account might be a Zacco no fee brokerage account where if you have enough assets you can trade tiny penny stocks with no commissions. I am proud to have purchased 6 shares of Sirius Radio corporation on the site for 15 cents each just to see it could be done with no commission- If I am wrong about the investment of about 90 cents then the US Pentagon or one of the major political parties will end up owning yet another satellite communications company paid for by private investors and my losses might be 90 cents! Satellite radio is the future of radio even if the company does go broke . So yes you can loose money reading this and it is all your fault if you do. |
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Review of top stock brokers::Tips for Choosing an Online Stockbroker
Review of top stock brokers::Tips for Choosing an Online Stockbroker
The economy's hit a rough patch, and you're trying to stay the course with your small business. It's perfectly understandable, right? You need to save money. You need to make money. It isn't complicated, but it's hard for your family. It's hard for you. And it's hard for your business. There are only two ways to do this. Either increase your income, or decrease your expenses. If we could just snap our fingers and make more money, we'd be snapping and dancing all night long, trust me. We'd all make a night of it together. There would be nothing more powerful and optimistic than a group of entrepreneurs filling a dance hall snapping their fingers and swing dancing. It hasn't happened yet, and the stock market's currently taking a beating - we haven't seen the stock brokers tap dancing in a long time, either. Until that day comes again, we've got to be realistic - instead of focusing on a drastic increase of income, we've got to decrease our expenses. Lucky for us, our work from home jobs come without the cash for commuting or the expensive wardrobe. However, it's best to stop ordering from Amazon and start taking trips to the local library for a while. That's right - curtail some expenses you really don't need! No more takeout on Fridays, either. Try to start eating only what's in your pantry. These things add up, and as a home-based business, especially a sole proprietor, your domestic budget and your business budget walk hand in hand. Don't upgrade software every chance you get. In face, start looking into open source software - such as Open Office, which are compatible and always free, instead of using the big boys such as Microsoft. These programs have some great features such as saving in many file formats - from .doc to .pdf, and they are relatively easy to use. And, did I mention - they're free? Use effective advertising and marketing - and don't fall for every "new advertising method" that comes out. There are hundreds of "pay per click" gurus out there that will wipe your credit cards clean with Google AdWords using every keyword imaginable to get clicks to your website - but will those clicks convert? Don't waste money on getting clicks - use common sense on what has worked for yourself and others. Marketing your services is more important that marketing your website - so make sure your advertising actually reaches the people you are selling to. Don't go for clicks - go for customers. Take full advantage of free advertising to build the business and the credibility. There are free ways to advertise that are almost as effective as PPC advertising and paid-for advertising, including writing articles for other publications, starting blogs, posting to others forums, and soliciting reviews of the services and products you sell. Don't spend money on advertising that doesn't work when you can simply build a reputation that stands. Remember - keep things simple in a small business - and look at the big picture. If you overextend your funds, there won't be any money left for you tomorrow. You cant to keep cash flowing in, not out - so look at what you have to gain by every dollar you put out, realistically. Don't look at what your competitor is doing, but the guys that are two steps above you - would they see a return on the same thing? Did they do something similar in the past? Target's top guns have written plenty of articles and sent out plenty of press releases, newsletters, and other marketing material, but they waited a few years before they invested in Google AdWords - and they were already a household name. So why should YOU skip the traditional advertising phase? |
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