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advertising claiming seemingly low commission rates for active traders$10, $20, $25, $29 for any trade, any number of sharesyou will find some of these advertisements are deceptive because they don't disclose the true price you pay. They don't tell you that the broker is getting paid off by the "contra" (other) side of your trade, a practice known as payment for order flowusually costing you far more than the alleged discounted commission. The payoff your broker receives from the broker on the other side (the contra) in many cases equals or exceeds the commission charges your broker receives from you. Whom do you think your broker cares about more? You or the firm paying your broker perhaps millions of dollars annually? For example, you may be paying "only" a $14.95 commission on a trade of 1000 shares of stock, when in reality you very well might have been cheated out of an eighth or quarter point on the price. The effects of payment for order flow are discussed at length later in this book. |
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Instantaneous Order Execution |
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Speed of execution of your order is another key factor. A successful day trader cannot tolerate any delay in the execution of his or her orders. Market makers (your real competitors) have immediate access to other market makers and can react in seconds to moving markets. A successful day trader must be able to do the same. As little as a 1-second delay can cause you to miss a tradean almost insurmountable disadvantage. |
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Among the many advantages you will want in your trading execution system is your ability to execute your order virtually instantaneously by clicking your mouse button. Your system should automatically default to your preferred trading style by formatting your order instantly and extracting data from the quotation screen automatically to correctly price your order. |
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With the right computer system, the formulation and timing of execution of your order is in your own hands. The only delay in execution should be the time between the commencement of a market trend (or other decisional factor) and your reaction |
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