Once you understand the very important differences between online brokers and professional trading firms, you will realize why you should dump your online broker!
Online brokers such as Ameritrade, ScotTrade, Fidelity and many others are the gateway to the stock market for most people. For savvy investors with larger balances or an active trading style, however, there are definitely better options that you should be aware of.
Professional firms that specialize in brokering even the most sophisticated traders can offer retail accounts to non-professionals, in the same way that online brokers can, but with a much higher level of technology and sophistication.
You can have a retail account with a firm that specializes in professional trading and utilizes the latest in technology for optimum trading results.
Costs of Trading with an Online Broker vs Pro Trading Firm
Online brokers will charge a flat fee of anywhere from $4.95-$9.95 per trade which may look enticing, but professional trading firms offer per-share commissions that can be far less!
Most professional trading firms start with commissions around $.0035/share, which means that a 100-share order would cost you only $0.35!
Working with a pro trading firm allows you to break your orders into smaller sizes, giving you more control and less market impact. Instead of sending 1000 shares all at once, you can work smaller orders more efficiently and price average your entry points resulting in a much lower cost to you.
The other cost of trading at pro firms is the exchange fee. This can vary, from as much as $0.003/share to take liquidity, to being paid $0.002/share to add liquidity.
That’s right – the online brokers don’t want you to know that they get paid for putting your order on the market!
Placing 1000 shares on the bid and getting filled means you pay $3.50 in commissions, but get $2.00 back from the venue, for a net commission of only $1.50.
It is important to know and understand what all of your trading fees are to buy and sell, and to be aware of any miscellaneous fees that may arise. Great Point Capital can assist you in evaluating your current fee structure compared to fees from a professional trading firm.
Quality Execution of a Professional Trading Firm
There is a great disparity between poor execution and quality execution when it comes to how your stock order is routed and executed, and most online stock brokers don’t know the difference.
Active traders need to see true, real-time quotes, full depth of quotes, information about their open orders and positions, and filter tools to search for the best opportunities. Having access to professional software like Takion gives pro traders all these features at their fingertips, making an enormous difference in quality execution of your order.
Takion offers fully customizable windows and keys that allow the pro trader to set up their trading software exactly how they want it. Built for speed, it won’t choke when the market gets busy.
Great Point Capital is one of the few chosen firms to utilize Takion, the professional trading platform giving traders the competitive edge to conduct the most advantageous trades for your order.
Clicking through order entry screens when you are trying to take advantage of fast-moving markets can cause you to miss trades. Missing a great trade, or paying a higher price for the stock because of a delay in getting the order into the market can cost you several times that low commission.
If you end up paying $65.10 instead of $65.05 for 1000 shares of that stock, that’s $50 out of your pocket! Doing that a few times a month really adds up. Professional software like Takion is designed to be customizable to the point where one keystroke enters your order and routes it directly to the market, so when you see your price in the market you can jump on it.
Order Type Availability with Professional Trading Firm
Most online brokers sell your orders to the highest bidder, this is also called “payment for order flow”. Payment for order flow, (POF), is a common arrangement that’s been around in US Markets for quite some time. POF is an arrangement where a third-party firm pays brokers to send orders to them rather than to the open market.
With pro firms, you direct your order however you like. See if your broker allows you to do any of these:
- Put your order only into dark pools, to minimize market impact
- Try to buy at the midpoint, rather than paying the spread. Buying at the midpoint, rather than buying the offer price, saves you .005/share, or $5 on a 1000-share order.
- Split your order among multiple liquidity pools, and move with the bid or offer.
- Get paid by the exchange by tagging your order as Adding Liquidity Only
- Use IEX’s new Discretionary Peg order, which is designed to predict upcoming changes to the NBBO, protecting investors against structural arbitrage.
Professional firms have access to a wide variety of order types that will benefit you when either adding or removing liquidity. Trading with the best matching order type, with speed and quality execution, is the key to higher returns.
Great Point Capital offers the knowledge and resources to utilize the most advantageous order type and venue, giving you the best return on your investment.
Have you ever tried to sell a stock short, only to have your broker decline the order as ‘not available to short’?
Pro firms maintain clearing relationships with firms that have extensive lists of easy-to-borrow stocks, and use third-party locate firms to fill in the gaps, tracking down stock for you to borrow at reasonable costs.
Great Point Capital gives you the widest selection of stocks to trade by partnering with firms that specialize in locating hard-to-borrow names.
Advantages of Pro Trading Firms Over Online Brokers
Evaluating the pros and cons of working with a professional trading firm over an online broker result in a long list of advantages when working with a professional.
In addition to personal service from an experienced professional, you gain immediately with lower commissions and exchange fees, faster quality execution of your order, availability of the most advantageous order types and hard to borrow stocks, resulting in a higher return for your investment and more money in your pocket.
If you are an active trader trading more than 10k shares per day, or you keep high-balance brokerage accounts to take advantage of opportunities in the market as they arise, you owe it to yourself to take a look at pro firms like Great Point Capital.
As a FINRA firm, GPC can give you a brokerage account with all of the advantages available to professional traders, including the same SIPC-insured backing.
Great Point Capital has been serving the trading community since 2001. We are one of the very few firms utilizing the Takion Software Platform, enhancing your trading performance with fast and high-quality order execution. GPC offers professional and experienced account and wealth management. To earn maximum earnings on your trades, contact us today to speak with one of our knowledgeable trading experts.