In this video, we're going to be talking about the hidden costs of trading. A lot of the ones on this list you will have heard of before, but I guarantee you at least some of the ones on this list you have no idea of. and I always encourage folks to treat trading as a business. and like with any business, it's very important to identify your costs and then figure out in some cases how to lower them.

And it is no secret that the first way to lower your expenses is to do something ravishing such as hitting that ravishing like button and of course also subscribing for more short sweet simplified videos on how to trade a stock market. So our first hidden fee is the FINRA fee. This is a transaction fee every single time you sell a position. It does not matter what broker you are using if you are trading in the United States of America than you are paying this fee.

It is billed at a rate of 0.001 1 9 per share and whatever that comes out to is rounded to the nearest penny. So that means that you are paying a minimum of one penny per transaction. Now this doesn't sound like much, but let's go ahead and put this into perspective. That means that folks who trade with an average volume of about 5000 shares a day will be paying about 60 cents per day.

Which if you trade 250 days a year which is pretty reasonable I think that there's only 252 trading days in the year, then that comes out to 150 dollars every year. But the fee does start adding up for folks who are trading with a high volume. If you are going into and out of multiple positions every single day and our trading say small caps or high volume, high liquidity, large caps, then trading with 25,000 shares or more in daily volume is not is not that abnormal. And if you trade with 25,000 in daily volume, you'll find yourself paying two dollars and 98 cents per day.

This comes out to 745 dollars per year, which is quietly siphoned from your account over each transaction. so you can quickly see how the FINRA fee can be a relatively annoying cost for something that many people are completely unaware of. And yes, there is a maximum fee of $5.95 but that's per transaction and again, this is over many transactions. So in summary, the FINRA fee will probably be siphoning around 100 to $700 from your account annually depending on how frequent of a trader you are.

Now, the next fee is another beautiful regular and this is the SEC fee. This rate is adjusted often, but it's a very small fee based on the dollar amount instead of the amount of shares. This is zero Point Zero, Zero, Zero, Zero, Two, Zero, seven of every dollar that you trade. So if you are trading with ten thousand dollars a day, your SEC fee is 21 cents.

That's very small, but let's say that you are a career trader and trade with a let's say, a lower-end 30 thousand dollar trading account. If you trade, say fifteen thousand of that account every day and are utilizing margin to deal with the settlement times, then you likely have a trading volume of about 360 thousand dollars a month. To explain this, if you buy and sell fifteen thousand dollars a day in securities, you may be only making a few hundred dollars in profit, but you are still selling fifteen thousand a day in securities. and this comes out to about 360 thousand dollars a month.

Assuming twenty two trading days in a given month and three hundred sixty thousand dollar volume a month times months in a year times, the SEC fee rate comes out to about eighty nine dollars a year. Again, not significant at all, but still. odds are strong that as time goes on, you will trade with a higher dollar volume and this will leak some of your games as they get siphoned out of your account. Okay, so the next ones have to do with the broker that you were using.

It's widely known that the only party guaranteed to make money when you were trading is the broker that you're using. The first way that brokers make money is by charging Trading Commission's Now, these are being slowly antiquated by Commission free brokers such as Weeble link below, but they are still hanging around and most professional traders are using platforms that still have them. So if you are using TD Ameritrade Stager Swim, which is the paltry one on this channel, the baseline cost per trade is $6.95 and if you are day trading and you make an average of four round-trip trades a day buying and selling, that's fifty five dollars and sixty cents of trading Commission's each day whether you make money that day or not. So you could hypothetically lose all of your trades and you'd still have to pay that fifty five dollars and sixty cents.

It doesn't matter whether you're winning or losing, so if you trade two hundred fifty days a year, that's just under fourteen thousand a year in commissions alone. So a huge chunk of change. And while that is horrendous, to be fair, most brokers will give you a discount, even TD Ameritrade They will give you discount once you've traded with them for a while and that is based if you factors such as how frequently used the platform, how valuable you are to them, and also the prom. Perhaps the most important is how you ask, but generally speaking, the customer service at TD Ameritrade is told that they can go as low as 395.

I Have heard some people that do 295, but I do think that's based on the volume of how many shares you trade, but it should be fairly easy to give 395 in commissions and at 395 that would only come out to seven thousand nine hundred a year. But still, this does add up and Trading Commission's aren't deductible, but they do step up your cost basis in the stock. so in a small part they do reduce your tax liability at the end of the year. And of course, the best way to reduce your trading commissions is to simply use a commission free broker.

You could save yourself a minimum of what we just found maybe seven thousand, nine hundred dollars a year by using a free broker such as Weeble. Now I Understand that a lot of people think of this as sort of they get what you pay for a type of ordeal, but that's not really the case in most situations. Most if not all brokers profit from what's called the bid and ask spread on your orders and this is the way they profit from your order flow. For example, your broker may offer to sell you Tesla at $200 and two cents a share even though they get it for $200 This allows them to profit from the extra two cents and most commissions free brokers have a bigger spread between buying and selling prices.

and thus a lot of traders will argue that commission free brokers are a ripoff. But this argument for most people, especially new traders, is almost always BS. If you are buying the 100 shares of Tesla at $200 in two cents, that would cost you a total of twenty thousand and two dollars. Now, most new and novice traders aren't buying $20,000 worth of equities, but let's just assume they are so that we give these people the benefit of the doubt.

Even at this high estimate, the extra spread will cost just two dollars. If you had used a commission based broker, you would be out of the commission of 695. So by using a commission free broker, you just saved yourself $4.95 for that trade. Now this is assuming your commission based broker doesn't also profit from the spread between buy and asking prices, and that would be an inaccurate assumption.

So in reality, your commission based broker ends up costing a lot more. But yes, once you start getting into really high volume trades, it may eventually start to make sense to trade using a premium broker. But for the vast majority, using a quality Commission for you, bro is going to be far superior. And with that being said, I Do personally still use TD Ameritrade because it's sort of like the gold standard of premium brokerages and you can't teach an old dog new tricks.

Wolff But anyways, building off the previous point, the next hidden cost is the money siphoned out between buy and asks spreads, and this is the amount of revenue broker's received from the order flow when their systems go out and fulfill your orders. Now if you are using Robin Hood for example, their rebate according to the CEO is about 2.6 cents for every $100 created. And going back to our early estimate of how much dollar volume a professional trader might trade in a single month about three hundred, sixty thousand dollars, then you are now being siphoned out of ninety three dollars and sixty cents a month. and that comes out to one thousand, one hundred and twenty three dollars a year.

And while not significant on its own, you could see how the costs and fees on this list quickly add up. and there's also a lot of speculation that rebates per dollar vary significantly based on the volume of your trades, so you could be potentially losing a lot more. The next way they get you is through margin fees. When you are trading with a margin account, you may often find yourself using margin to either leverage your positions or a trade when your cash is still settling assuming a margin interest rate of 6% If you use 15,000 and margin and hold a position for five days, this will come out to about two dollars and fifty cents.

Now, this isn't very much and it varies a lot based on what you were doing and what you were using margin for. Obviously, if you're just a trading, margins not going to be very costly so I don't want to get too far into this, but it could potentially add up quite a bit if you're using a lot of margin and you're using a very high volume of margin for a very long period of time. And yes, there are more hidden fees on this list that you may encounter that I haven't yet talked about on this list. For example, some brokers charge maintenance fees, a lot of brokers trying to wire transfer fees, and a lot of them charge in activity fees, and these things can also add up really quickly.

But I'd say most of the good brokers don't really charge these things. but when it does come to wire transfers, a lot of people do get upset that most brokers even Robinhood charge pretty steep fees, but a lot of these fees are pretty standard. I Get a ton of messages from folks who deposited a couple hundred dollars into Robin Hood or we bowl and then have to pay $25 but this is simply not necessary. Instead of water transferring for these high fees, you could instead simply use an ACH they transfer for free! It always shocks me that so many people use wire transfers and just opt to pay because the one in most cases you could just use an ACH bank transfer for $0 And last but not least, I wanted to put this potential new hidden fee towards the end of the video because people have a habit of turning topics political.

but this is not a political opinion in any way, shape or form. I Do want to take a second to talk about Bernie's proposed speculation tax, which may directly impact us as individual traders. and again, this is not an opinion on policy whatsoever, but rather an objective look on how this would affect us as individual traders. So Sanders has proposed a 0.5 percent tax on stocks in the 0.1 percent on bonds.

Now, these proposed fees are taxed in a similar manner to the FINRA and SEC fees that we covered in the beginning of the video, but they are substantially higher and are paid on that one side, but on both sides of the transaction. So if you have three hundred and sixty thousand dollars in dollar volume per month, which again, isn't actually as much as it sounds based on the numbers we looked at earlier, that would be $1,800 for each side of the execution. For two sides of the execution, you know the buy-side and sell-side That would come out to you $3,600 a month, or forty three thousand, two hundred dollars a year. If you are a new trader, this new tax would be much smaller, but it would still equate to essentially pain another trading commission.

every $1,000 buy will cost you $5 and one every $1,000 sell will cost you another $5 And if your goal is 1% growth per day, which takes a lot of practice to achieve and a lot of people don't get there. This proposal is essentially saying that they want to take essentially half of that growth right off the bat. and that's assuming that you get that 1% growth on just one trade. If you get it on many trades, they're probably going to take all of it.

and then of course, after you have to pay regular taxes on what's left. And yes, this is just something that he is proposing and he may very well change either tax rates or exempt small traders. but it is something that I felt I should mention. I Know that there's a lot of people from different you know, sides of different opinions and different life experiences, but I do just want to mention this so that you guys understand that this is something potentially that people are talking about.

But anyways, if you made it to this point in the video, let me know what you think below and I'm also curious as to how many people actually made it this far in the video, so let me know in the comment section below. Anyways, I Hope this video is helpful and got me thinking a little bit more about the expenses having to do with trading. If you have any questions, feel free to comment below or reach out to us on the Zipp Crater circle Facebook group. Anyways, have a great day folks and I'll see you in the next video.