just a little confused on how you can make money from day trading or trading penny stocks. if you buy and sell penny stocks isn’t it costing you more money than it is making you? you buy at 1.56 a share and you sell at 2.78 a share…. so you profit 1.22. but you don’t profit if your broker charged you 7 bucks to buy. someone please help im so confused. where should you go to do day trading and trade penny stocks?
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5 Comments on “how do day traders profit if brokers charge them 7 bucks for a trade?”
Kiker 7th March 2010
Day-traders profit in two capacities.
1) knowledge. they don’t make stupid calls and don’t focus on the price…they focus on the fundamentals and the immediate market momentum.
2) volume! $7 per trade is not per share! So with a margin account, they can purchase more shares than they have the actual cash for. This margin account dillutes the impact a commission fee has on their overall account performance and increasing their profitability.
Now many day-traders avoid penny stocks. Hell, I avoid them. I played with them for a bit, but they really aren’t that great an option. Nothing burns more than when you see a penny stock you own jump 215% in one day…and then you sell…but cannot get a buyer because everyone is now selling…and then the stock drops to -50% before you can even get out!
penny stocks are a buyer beware world, and they do not yield better returns than the real stocks. people flock to pennies just because of their price…and anyone of merit knows that a stock’s price means nothing…its all about its fundamentals.
hope this helped.
Greg S 7th March 2010
You buy and sell more than one share at a time. If you profit 1.22 per share and you have 100 shares you just made $122.00 – $7 to buy – $7 to sell = $108.00 taxable profit.
You need to do some more research before you invest, especially if you are looking at day trading.
Supra1Q 7th March 2010
significant amount of capital for each position day trading or penny stocks; or using options/futures which give you tremendous leverage in this regard(not typically available for penny stocks)…….
Oh Boy! 7th March 2010
First, most day traders don’t trade penny stocks. They trade the most active, liquid stocks on the NYSE and NASDAQ.
Second, they pay an institutional rate for trading which turns out to be between 1 and 2 cents per share.
Ron Berue 7th March 2010
If you’re a day trader, UNLESS you buy HUGE quantities of stocks – 100s of thousands or millions of shares – you don’t buy penny stocks.
To a trader stockbrokers are like air, food or clothing: they are a necessity. Before a trade is placed to buy or sell – ALL the diligence is done – or should be – including how much of a loss the trader will accept.
BTW, the broker doesn’t care whether a trader earns money or loses money: brokers get their money as traders go into a trade AND exit a trade.
Personally, I don’t even waste my time looking at any stock costing less than $26.50 per share. I have many other tr ding rules, too.
I’m a swing trader – usually in and out within 5 days. I DON’T have the funds to be a consistent day trader, which is $25,000 and more.
Thanks for asking your Q! I enjoyed answering it!
VTY,
Ron Berue
Yes, that is my real last name!