Basic Techniques  |  OCT 2005

The Beginning Trader by Thomas Bulkowski

Stocks & Commodities V. 23:10 (40-44): The Beginning Trader by Thomas Bulkowski Here are some tips to help a beginning trader become profitable. You may be approaching retirement and want to supplement your income or earn enough money to afford the rising cost of health care. You may be a decade out of college, employed at a boring job, and yearn to have a 30-foot commute. Your dreams may be of trading for a living and making a six-figure income while taking days or even weeks off without a boss asking where you’ve been. This article will help steer you in the proper direction to achieve those goals. Lesson 1: Keep trading costs as low as possible I used to think trading stocks was a zero-sum game where one trader wins a dollar and another one loses a buck. It’s not. It’s a negative sum game. The difference is the cut the broker takes along with a slice paid to the government — costs you have to overcome to be profitable. No one says you have to use only one broker. You can use a full-service broker and a discount shop. My preference is to use one broker to keep things simple. Simple is best. I’ve always used a discount broker for my trading. They keep costs low and don’t give investment advice, two ingredients I find valuable. Why spend $50 trading a stock when you can spend $10? For example, in my portfolio, I hold a stock I bought for a split-adjusted price of 88 cents in 1990. It peaked recently near $44. I’ve traded it over the years but never sold all of my shares. In the 46 times I’ve traded it, my broker has made $1,720 off me, or an average of $37 per trade. I consider that commission huge compared to the $10 or less I can get Internet trading now. Why pay full price when you can get trading done at a discount?

by Thomas Bulkowski